Harvard Researchers Examine the Impact of the COVID-19 Pandemic on Community Banks and Propose Federal Policy Changes to Support the Industry

February 11, 2021 9:09 AM EST

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CAMBRIDGE, Mass., Feb. 11, 2021 /PRNewswire/ -- Community banks issued almost two million PPP loans worth nearly $200bn in less than three months, representing 45% of the total number and 41% of the dollar value, while only controlling 12% of banking assets, according to a study released today by two researchers at the Mossavar-Rahmani Center for Business and Government at Harvard's John F. Kennedy School of Government. The study analyzes the role of community banks as a critical financial conduit for individuals and small businesses during the COVID-19 pandemic and proposes federal policy improvements to strengthen the sector.

Despite secular headwinds, the community banking industry remains uniquely positioned to expand access to financial services and crucial business capital in cities, towns, and rural areas across the country, and community banks, particularly CDFIs and MDIs, are vital to economic opportunity in communities of color. In the study, Marshall Lux, a Research Fellow at Kennedy's Mossavar-Rahmani Center and a Senior Advisor at The Boston Consulting Group, and Matthew Shackelford, a Research Assistant at the Center, examine community banking trends from 2015 through the present and show that they are essential to entrepreneurial endeavors and the American economic engine.

In this paper, Lux and Shackelford propose changes to federal policy that would bolster the vital community banking industry, including tailored regulation, more proactive oversight practices, government investments in technology systems, and increased flexibility in the SBA 7(a) loan program.

The full paper can be downloaded at https://www.hks.harvard.edu/centers/mrcbg/publications/awp/awp159

Marshall Lux is a veteran financial consultant. He is available for interviews on "Community Banking and Its Impact on America: Updated Analysis for the COVID Economy." Please contact him at marshall_lux@hks.harvard.edu.

About the Mossavar-Rahmani Center for Business and Government

The mission of the Mossavar-Rahmani Center for Business & Government is to advance the state of knowledge and policy analysis concerning some of society's most challenging problems at the interface of the public and private sectors. The scope of its work ranges from the local to the global. Drawing on the unparalleled intellectual resources of the Kennedy School and Harvard University, and bringing together thought leaders from both business and government, the Center conducts research, facilitates dialogue, and seeks answers that are at once intellectually rigorous and policy relevant. For more information, please visit www.hks.harvard.edu/centers/mrcbg.


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SOURCE Mossavar-Rahmani Center for Business & Government

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