Josh Silver | Creating Jobs Workshop 2

Creating Jobs in Our Neighborhoods!

Creating Jobs in Our Neighborhoods!Josh Silver, Vice President of Research and Policy, NCRC April 20, 2012


•  Case Study – Comprehensive Study on Access to Credit and Capital for the Appalachian Regional Commission! !•  Power of Data – Can Identify Geographical Areas Served and Gaps!!•  Limitations – Limited Demographic Data on Small Businesses!!•  Limitations on Demand Analysis for Loans or Ability of Small Businesses to Qualify for Loans!!•  Dodd-Frank Requirements to Enhance the Data!!•  Objective – Increase Access to Responsible Credit by Holding Financial Institutions Accountable!!

Power and Limitations of Current Small Business Data!


!•  Measure access to credit and capital for small businesses. Compare US to Appalachia and categories of counties and sub-regions within Appalachia

•  Supply of loans and investments by banks, CDFIs, equity funds, RLFs, and other institutions

•  CRA small business lending, SBA 7a, SBA 504, microloan program, CDFI lending

•  Distribution of banks, credit unions, CDFI and other institutions in Appalachia

•  Explore relationships between access to credit and distribution of lenders, concentration levels, branches

•  Spatial autocorrelation, mapping, county index, demand analysis

!

Objectives of Study of ARC Study

61.6%

50.3%

55.5%

46.2%

33.3%

50.9%

50.0%

19.5%

16.2%

19.4%

15.8%

11.1%

15.7%

14.8%

0% 20% 40% 60% 80%

United States

Appalachian Region

Northern Appalachia

North Central Appalachia

Central Appalachia

South Central Appalachia

Southern Appalachia

2007 2010


•  Identify credit card small business loan specialists – large institutions typically, but do data limitations impede analysis?

•  Hypothesis: more credit card lending in disadvantaged counties with less creditworthy small businesses and less access overall to loans. •  Is credit card lending correlated (neg. or pos.) with overall small business lending?

•  Anomalies occur: large market share in attainment counties

•  Market share increased in distressed counties !!

Credit Card Small Business Lending!


•  7a and 504 not targeting disadvantaged counties

•  Microloan program is better at targeting, but smaller than 7a

•  Access for minorities for 7a is better than access for females – females not being targeted in disadvantaged counties

•  Important: Publicly available data by race/ethnicity and gender for SBA lending but not for CRA lending !!

SBA Lending!


•  Disclosed as part of the CRA regulations!•  For aggregate, disclosure by census tract!•  For individual lenders, disclosure by income category of tract!•  Dollar size of loans in categories!•  Two revenue size categories – above and below $1 million in revenues!•  Revenue size not disclosed if revenue of small business not used in decision!•  That’s about it…useful but quite limited!!

Current Small Business Loan Data!


The purpose of this section is to facilitate enforcement of fair lending laws and enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.!!

Section 1071 – Small Business Loan Collection – Dodd Frank!

Creating Jobs in our Neighborhoods!

•  Open ended on which institutions required to report, can include non-banks!•  CFPB will have discretion to decide which institutions will have exemption from reporting!•  Big deal in Appalachia – mid size banks ($250 to $1 billion), but they are just voluntary reporters…don’t know yet how much of the loan data is from mid-size banks. Our previous report for ARC in 2007 found significant role for mid-size banks before their data reporting requirement was deleted.!!

Dodd-Frank Section 1071 - !


•  Demographics – Race and gender of the small business owner, revenue size of business; census tract!•  Type and purpose of loan – Possibilities are credit card, origination, refinance, govt. guaranteed!•  Action taken on application; amount of credit limit approved!•  Data availability – must retained for three years and made available in form prescribed by the CFPB!•  Discretion for CFPB – to add data elements which fulfill purposes of Sec1071 or delete elements to protect privacy of borrowers!

!!

Dodd-Frank Section 1071 – Small Business Loan Data!


•  Assess if credit needs are being met for various demographic categories of small businesses & identify missed business opportunities!

•  Better enforce fair lending laws!

•  Enhance studies like ARC that seek to identify if private sector and public sector programs are meeting needs and direct actors to addressing gaps in access!!•  Next generation of small business data – include information like creditworthiness like new HMDA data; collateral like LTV for new HMDA data?!!

Enhancements to Small Business Data Critical!

THANK YOU!!

To follow up with the speaker:!Josh Silver, Vice President of Research and Policy, NCRC!202-464-2708 or [email protected]!

Presentations will be available at www.ncrc.org/conference by !April 30, 2012!

Josh Silver | Creating Jobs Workshop 2

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