Small Business Lending and Economic Well-Being in Texas Counties: A Test with Community Reinvestment Act Data

F. Carson Mencken, Charles M Tolbert


Utilizing the Community Capitals framework we examine the impact of Community Reinvestment Act (CRA) reported small business lending on the economic well-being of Texas counties in 1999–2000. We combine data from multiple data sources, including the County Federal Financial Institutions Examination Council (FFIEC) annual county Aggregate and Disclosure data—collected under directive of the 1977 Community Reinvestment Act—and use GeoDa to model the impact of small business lending in each Texas county from 1996–1999 on the 1999 county poverty rate, median family income, Gini income inequality coefficient, 2000 per capita income and 2000 nonfarm earnings per worker. Controlling for other dimensions of the Community Capitals Framework, the results show positive effects of small business lending on two income measures—per worker nonfarm earnings, and per capita income. Furthermore, we find the small business lending from 1996–1999 reduced poverty and income inequality in the most rural Texas counties. Implications for theory, policy, and research are discussed.

Keywords: community development; small business; financing; rural

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The Journal of Rural and Community Development is supported by SSHRC.