Unravelling the impact of the Community Reinvestment Act on SBA lending: Insights from a regression discontinuity design analysis

ABSTRACT

This study investigates the influence of the Community Reinvestment Act (CRA) on Small Business Administration (SBA) lending in various U.S. urban areas. Focusing on central cities, inner-ring, and outer-ring suburbs across seven major metropolitan statistical areas, it employs a regression discontinuity design to analyze CRA’s effect on neighborhoods with median family incomes at or below 80% of the area’s median. Results show that CRA significantly increases SBA lending in inner-ring suburbs but not in central cities or outer-ring suburbs, indicating a geographically varied impact. This research underscores the spatial differences in CRA’s effectiveness, suggesting a need for more tailored strategies to improve SBA lending in diverse urban settings.

KEYWORDS:

• Community Reinvestment Act
• SBA lending
• central city
• inner-ring suburbs
• outer-ring suburbs

Acknowledgments

This paper has been revised and developed from a section of my PhD dissertation. I would like to express my heartfelt gratitude to my advisor, Dr. Cathy Liu, for her invaluable guidance and support throughout this journey. Additionally, my sincere thanks go to the committee members for their insightful feedback and unwavering encouragement. Their expertise and dedication have been instrumental in shaping this work. Furthermore, I extend my appreciation to the four reviewers whose constructive comments and suggestions greatly enriched the quality of this paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Notes on contributors

Joowon Jeong

Joowon Jeong is an assistant professor in the Department of Public Administration at Kyung Hee University. Her primary research interests include the utilization of AI and Big Data technologies to address urban challenges, including urban shrinkage, smart city initiatives, entrepreneurship, shifts in employment and labor markets, and spatial accessibility to both governmental and non-governmental services. Additionally, she holds a keen interest in urban development issues within an international scope, particularly in Asia. Her work has been published in journals like Cities, City & Community, The Social Science Journal, Nonprofit Voluntary Sector Quarterly, and The Journal of Policy Studies, among others.