Testimony of Sharmain Matlock-Turner

President

Greater Philadelphia Urban Affairs Coalition

For Public Hearings of the Committee on Commerce and Economic Development of the City Council of Philadelphia

March 25, 2004

Chairman Goode and members of Council, good afternoon. Thank you for offering me and my colleagues at the Greater Philadelphia Urban Affairs Coalition an opportunity to present testimony to you on the subject of small business lending in low- and moderate-income and minority areas within the City of Philadelphia.

This is an issue about which there is broad consensus on at least one point – we all agree that the vitality of our small business sector is crucial to the economic health of our City and the quality of life of our neighborhoods.

Studies by the National Community Reinvestment Coalition and the Office of the Comptroller of the City of Philadelphia have identified disparities in the distribution of loans to small businesses in lower-income and minority areas compared to other areas of the City. Unfortunately, the data is insufficient to identify the precise causes of these disparities.

Studies conducted in other parts of the country and reported in the Federal Reserve Research Conference in 1999 isolated a number of factors such as firm size, credit histories and personal wealth and have found them to account for much, though not all of such disparities.

Regardless of whether the reasons for the disparities reside in the nature of the market or in the policies of the lending industry the fact remains that less-than-proportionate distribution of loans to small businesses in lower- income and minority areas is not good for our City.

It is therefore incumbent on us as civic leaders to figure out how to close the gap between the "credit readiness" of the small business owner and the "lending willingness" of the bank.

Toward this end GPUAC's Community and Economic Development Committee, co-chaired by Ray Desiderio of PNC Bank and Rick Sauer of the Philadelphia Association of Community Development Corporations, recruited a diverse and dedicated group of experts to form a Small Business Lending Task Force. Leslie Benoliel, Executive Director of the Philadelphia Development Partnership was appointed Chairperson. Don Kelly, Director of GPUAC's Department of Community and Economic Development, was assigned to provide staff support.

Following my comments, Don will describe the Task Force and its deliberations in more detail. He will also summarize the key observations of the group about the nature of the problem.

You will then hear from the Task Force Chairperson, Leslie Benoliel, who will outline specific programmatic and policy recommendations accompanied by estimates of the public resources that will be needed to implement these proposals.

Allow me to conclude by setting forth a vision. We believe the ideas that you will hear can lead to a new, 3-year pilot initiative, based on a partnership between the private and public sectors, that will demonstrate that the amount of lending to small businesses in lower-income and minority areas can doubled from approximately $100 million a year to $200 million.

As President of GPUAC I offer the services of my organization to convene the Task Force together with banking and public sector leaders to build this new partnership.