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An Investigation into the Link between UK Credit Union Characteristics, Location and their Success

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Abstract

The unique characteristics of credit unions reduces the information asymmetry that is prevalent in credit making decisions, enabling them to provide loans where other financial institutions cannot. This makes them a potential tool in the fight against financial exclusion. Yet, the UK credit union movement is not regarded as being successful, even though there is evidence of much financial exclusion. This study is cross sectional in form, and evaluates characteristics that may contribute to the success of the UK credit union movement at national and regional level, in 2000. The findings are used to consider the impact of recent regulatory changes on the movement. The key findings are that there is a significant relationship between the success of a credit union, its size and the deprivation of the ward from which it sources its members. More specifically, larger credit unions and those located in more affluent wards, are more successful. Affiliation to the Irish League of Credit Unions and having a common bond of occupation, are also found to be contributing factors to credit union success. These results are taken as providing support for the recent changes implemented by the Financial Services Authority (FSA), which is likely to result in the emergence of larger credit unions (through mergers), run by appropriately qualified persons, serving a more mixed-income membership base. It is, however, noted that the history of the UK movement is one of missed opportunities and only time will tell whether credit unions have the wherewithal to accept current opportunities. Copyright CIRIEC, 2005.

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... Credit unions are considered a potential instrument in the fight against financial exclusion, as they provide loans in ways and places where other financial institutions cannot reach (Ward & McKillop, 2005). Moreover, in the specific case of Brazil, there is a high concentration in the banking segment and these traditional financial institutions do not consider it economically interesting to operate in municipalities with less than 50,000 inhabitants. ...
... Authors such as Bastelaer (2000) and Ward and McKillop (2005) have analyzed the relationship between microcredit and cooperativism. Bastelar (2000) attributes the main microcredit methodology or technology, namely, group lending -which has become world-renowned more recently from the Grameen Bank experience -to the credit cooperatives created by Raiffeisen in Germany in the mid-19th century. ...
... This cooperative model, also known as "people's bank", used as criteria for the practice of group loans the residence of borrowers in small rural communities, the guarantee by the members (solidary guarantee) and the co-responsibility of peers for the loans (Bastelaer, 2000). Ward and McKillop (2005) point out that some specificities of credit unions, such as capillarity -they are distributed throughout the national territory, reaching even the most distant and less economically favored municipalities -, contribute to reducing information asymmetry, since it allows them to offer products and services in places where other financial institutions do not reach. ...
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This study analyzes the participation of Brazilian credit unions in the provision of microcredit in the period from 2017 to 2019. The cooperatives belonging to the four main cooperative credit systems in the country were considered: Cresol, Sicoob, Sicredi and Unicred. To meet the proposed objective, a documentary research was carried out as from the survey of secondary data from official agencies, in addition to data from the financial and accounting reports of the analyzed institutions. The literature consulted points out that credit unions have a greater incentive to carry out solidarity credit and microcredit operations, given their social nature. The results presented evidence that the microcredit offer by the analyzed cooperative systems is not very significant, representing, on average, less than 10% of the total microcredit portfolio in the analyzed years. The main conclusion is that most Brazilian credit unions, with the exception of those that compose the solidarity segment, have not had a significant participation in the supply of microcredit. It is hoped that these findings can contribute to the development of policies capable of changing this picture, that is, that these institutions, considered by the literature as the ideal model of organization to operate microcredit, can potentialize actions towards a greater insertion in the supply of microcredit.
... The prevalent practice in the literature on credit unions is to consider assets as the indicator of size (Amburgey andDacin, 1993 andBarron et al., 1994). Membership base, along with assets, as an indictor of size has been explored by some studies (Goddard et al., 2002, Ward and McKillop, 2005a, Ward and McKillop, 2005band Goddard and Wilson, 2005. Ward and McKillop (2005b) and Goddard and Wilson (2005) report higher growth and better financial performance for credit cooperatives with many members for the United States and the United Kingdom. ...
... Membership base, along with assets, as an indictor of size has been explored by some studies (Goddard et al., 2002, Ward and McKillop, 2005a, Ward and McKillop, 2005band Goddard and Wilson, 2005. Ward and McKillop (2005b) and Goddard and Wilson (2005) report higher growth and better financial performance for credit cooperatives with many members for the United States and the United Kingdom. Indian cooperatives have an average membership size comparable to that of the United Kingdom. ...
... The literature on the impact of a common bond on cooperative's performance provides additional perspective on the size of credit cooperatives in India. Performance of a credit union depends on the strength of common bond among members (Ward and McKillop, 2005b). Studies find a favourable impact of occupation-based commonality on the performance of credit unions, as commonality of occupation suggests tighter bonds and reduces operating costs (Ward and McKillop, 2005b). ...
Article
Credit cooperatives in India make up one of the largest rural financial systems in the world. Playing a vital role in dispensing credit in largely agricultural areas, they are also the weakest link in the formal credit delivery system. This book provides a valuable case study of the traditional banking system in this developing economy, exploring the reasons for the poor performance of credit cooperatives in India and suggesting measures to revitalise them. Although this sector has grown along with the micro-credit sector to provide finance for the poor and the less creditworthy borrowers, financing development still remains a major problem in the developing world. However, the financial health of credit cooperatives in India has been a matter of perennial concern. The author argues that cooperatives hold great promise for financial inclusion if the financial position of the cooperatives can be consolidated. Providing a detailed analysis of the historical evolution of cooperatives in India, the book establishes the link between different segments of this institutional system and their performance in a commercial sense to show that cooperatives occupy an important place in India's financial edifice as they play a key role in the multi-agency framework for rural credit delivery. As such, the analysis provides a valuable reference for scholars of economics, Asian economics and finance.
... Although the study focuses on one organisational form in a specific country, we argue that the results are potentially generalizable to other types of organisations as we control for study site-specific characteristics such as management ethos (trade association affiliation), social connections between members (common bond type) and other variables that are deemed to influence financial management such as organisation size, age and board size (Forker and Ward 2012;Forker et al. 2014;Ward and McKillop 2005). We find a positive association between gender diversity and financial management-boards with higher %WOB have higher LBQ; furthermore, the relationship is stronger in the period of austerity following the 2007 financial crisis. ...
... 6 In some countries, such as Canada and Australia, the board of directors in the larger credit unions now receive payment. Credit unions in NI charge the same interest rate (1 % per month); therefore, surpluses reflect the efficiency with which they utilise input costs to generate surpluses (Forker and Ward 2012;McKillop et al. 2005;Ward and McKillop 2005). The mean ROA for the population for the entire period is 3.61 % (pre-crisis mean, 2002-2006 is 3.95 %; post-crisis mean, 2007-2010 is 3.18 %: t test for difference in means is 9.44). ...
... Credit union age has also been found to impact on credit union behaviour Ward and McKillop 2005). The average age of credit unions in the sample is 26.11 years (see Table 2). ...
Article
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Although non-profit organisations typically have high representation of females on their boards, relatively little is known about the effects of gender diversity in these organisations particularly in relation to financial management. In this archival study, resource dependency theory and agency analysis are combined to provide theoretical insight and empirical analysis of gender diversity on effective financial management in member-governed, community financial institutions. The investigation is possible due to the unique characteristics of the organisational form and region being examined—credit unions in Northern Ireland. The sector has not been subject to external regulation on board gender, yet a wide array of gender mix on boards ranging from 100 % male to 100 % female are in existence. In addition, effective financial management is crucial to their survival and their ability to meet member objectives. Boards with higher female representation exhibit superior financial management first, in respect of loan book quality in the period of austerity following the financial crisis and second when measured against return on assets.
... The prevalent practice in the literature on credit unions is to consider assets as the indicator of size (Amburgey andDacin, 1993 andBarron et al., 1994). Membership base, along with assets, as an indictor of size has been explored by some studies (Goddard et al., 2002, Ward and McKillop, 2005a, Ward and McKillop, 2005band Goddard and Wilson, 2005. Ward and McKillop (2005b) and Goddard and Wilson (2005) report higher growth and better financial performance for credit cooperatives with many members for the United States and the United Kingdom. ...
... Membership base, along with assets, as an indictor of size has been explored by some studies (Goddard et al., 2002, Ward and McKillop, 2005a, Ward and McKillop, 2005band Goddard and Wilson, 2005. Ward and McKillop (2005b) and Goddard and Wilson (2005) report higher growth and better financial performance for credit cooperatives with many members for the United States and the United Kingdom. Indian cooperatives have an average membership size comparable to that of the United Kingdom. ...
... The literature on the impact of a common bond on cooperative's performance provides additional perspective on the size of credit cooperatives in India. Performance of a credit union depends on the strength of common bond among members (Ward and McKillop, 2005b). Studies find a favourable impact of occupation-based commonality on the performance of credit unions, as commonality of occupation suggests tighter bonds and reduces operating costs (Ward and McKillop, 2005b). ...
Article
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This paper analyses the factors governing loan recovery performance of the primary agricultural credit societies in 19 states of India during 1997–2005. The paper's main finding is that the government's contribution to equity capital of credit societies is detrimental to their recovery. Increase in member size and rising proportion of non-borrowing depositors also adversely affect their recovery. Comparative Economic Studies (2009) 51, 384–400. doi:10.1057/ces.2009.6; published online 14 May 2009
... Therefore, traditional financial analysis ratios are widely used to measure financial performance of cooperatives (6), (7), such as profitability ratios (8), (9), efficiency ratios (10), (11), leverage ratios (7), (12), and liquidity ratios (7), (13). ...
... The proposed attributes as a decisive factor of mosque cooperative include the size, type of services, and diversity of activities (4). Size of cooperative assets significantly has positive effect on financial performance of credit cooperatives (11). Larger credit cooperatives have lower cost to the percentage of income and enjoy economies of scale than smaller credit cooperatives. ...
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This paper proposed a framework that determines the success factors of a mosque cooperative in Malaysia. These factors will affect the financial and non-financial performance of mosque cooperatives. Six success factors proposed are organizational attributes, management and operational excellence, human capital, internal supervision and effective control, the level of support and spirituality.
... However, some research questions whether U.S. credit unions better serve lower income communities than other financial institutions (McKillop & Wilson, 2011;White, 2011). Also, research in the United Kingdom suggests that larger credit unions operating in relatively affluent areas ("wards") are more successful than those that are smaller and operating in economically less affluent areas (Ward & McKillop, 2005). That study is of particular interest because its unit of analysis was the ward or the area that the credit union served, not simply individual income. ...
... Not simply in the United States but also internationally, credit unions have been consolidated into larger units in part to be more competitive and address the cost of government regulations and in part to satisfy the demands for more products and services from their members (McKillop & Wilson, 2011). This structural change has strengthened them (Ward & McKillop, 2005), but it has also reduced the credit union difference. Another manifestation of market accommodation is breaking down the limits associated with a narrow bond of association and effectively lobbying the U.S. Congress to modify the legislation to serve a broader market. ...
Article
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Credit unions, nonprofit mutual associations also called financial cooperatives, have a lengthy history. The World Council of Credit Unions reports that credit unions are found in 101 countries representing 56,000 credit unions, more than 200 million members, and $1.7 trillion in assets. This study, following earlier research in Canada that found that credit unions are more prevalent in rural communities and small towns relative to the general population and to banks, examines credit union and bank branches in three U.S. states (Arizona, New Hampshire, and Wisconsin). We find that credit union branches are strongly represented in sizable urban communities, and are more likely to be located in low-income zip code areas than banks. The data show not only evidence of a credit union niche market but also a tension between social and economic objectives, and that credit unions accommodate themselves to profit norms, what we refer to as market accommodation.
... 3 The study also has policy implications. HM Treasury (UK) undertook a review of the regulation of credit unions in Northern Ireland (HM Treasury, 2010). One tangible outcome of this review was the transfer of credit union financial regulation to the Financial Services Authority (FSA) in March 2012. ...
... The public regulation of credit unions in Northern Ireland has remained static since the implementation of the Credit Union (Northern Ireland) Order (1985). 6 The current legislation is restrictive and is considered to hinder the development of the sector in Northern Ireland (HM Treasury, 2010) and as a consequence the UK Treasury set up a taskforce to review public regulation and oversight. One outcome of the review is that the UK Treasury is extending FSA oversight to credit unions in Northern Ireland after March 2012. ...
Article
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Credit unions in Northern Ireland are subject to a unique combination of statutory oversight and self-regulation. This paper investigates the association between prudence and the monitoring of financial ratios by credit union trade associations. We find that compliance with the mandated level of capital reserves is uniformly high, regardless of the existence or extent of self-regulation. However, after controlling for cross-sectional differences in profitability, age, size, growth and common bond type a positive association exists between self-regulation and financial ratios measuring prudence and loan book quality. These findings have policy implications for the regulation of credit unions in Northern Ireland and elsewhere regarding potential regulatory cost savings from reliance on self-regulation provided by trade associations.
... The literature on the impact of a common bond on cooperative's performance provides additional perspective on the size of credit cooperatives in India. Performance of a credit union depends on the strength of common bond among members (Ward and McKillop, 2005b). Studies find a favourable impact of occupation-based commonality on the performance of credit unions, as commonality of occupation suggests tighter bonds and reduces operating costs (Ward and McKillop, 2005b). ...
... Performance of a credit union depends on the strength of common bond among members (Ward and McKillop, 2005b). Studies find a favourable impact of occupation-based commonality on the performance of credit unions, as commonality of occupation suggests tighter bonds and reduces operating costs (Ward and McKillop, 2005b). As village level credit cooperatives in India lend to members belonging to different occupational categories, a better way to ensure the success of cooperatives is by having members exert moral pressure on each other. ...
Article
Full-text available
Cooperatives as an institution in India are more than a century old. With more than a lakh grass root level cooperatives, their presence is formidable. Notwithstanding, impressive gains made by cooperatives in terms of their rural outreach and coverage of small and marginal farmers, their financial health has been a matter of concern. The study is an attempt to enquire into the factors which impact financial health of cooperatives reflected through their recovery performance. The empirical findings suggest that government should allow the cooperatives to evolve in a natural manner rather than through initial official encouragement and subsequent intervention. Government’s contribution to share capital of cooperatives should be stopped. There is also a need to revisit the issue of appropriate member size for a base level cooperative so that cooperative principles are internalized amongst members. Very large cooperatives should be avoided both in principle and practice.
... A type of function provided by a co-operative was also found to influence the cooperative's financial performance (Ward & McKillop, 2005). The study showed that cooperatives offering credit and agriculture-related functions are financially well-off than co-1078 Initial Analysis on Predictors of Mosque Cooperatives Performance: ...
Article
Performance is a crucial aspect of any organization, including mosque co-operatives. Mosque co-operatives are expected to show good financial and non-financial performance. Mosque co-operatives need to ensure sustainable financial performance to continue benefiting the socio-economic well-being of the members and community. Besides, the strong financial performance of mosque co-operatives provides additional support to mosque institutions' activism. Hence, a question arises on the determinants of mosque co-operatives' financial and non-financial performance. Therefore, this study attempts to examine the predictors of performance from the perspective of mosque co-operators through the lens of Intellectual Capital Theory. The study found that the top three predictors of performance for mosque co-operatives are board members' competencies, spirituality, managers' competencies, and stakeholders' support, indicating the essentials of human capital, relational capital, and spiritual capital. This study provides initial insights to regulators, policymakers, and co-operators in enhancing the performance of religious-based co-operatives.
... Focusing on this nation, Ward et al. [52] underline the prolonged growth of these institutions at the national or regional level. Likewise, Ward et al. [53] analyze the link between the characteristics and location of credit unions and their financial success, which, on the other hand, is also strongly associated with environmental variables [54]. e global expansion of credit unions is evidenced by the countless number of studies spread over the five continents, both in developed and developing countries [55,56]. ...
Article
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Credit unions are one of the most widely established corporate entities in the financial systems of most of the world’s nations. Their historical support to the financing needs of small savers, as well as their assimilation into the framework of contemporary microfinance, gives them an important specific weight in the economic-financial literature of our time. In this sense, our research has carried out a systematic review of the main contributions (articles in scientific journals) focused on the area of credit unions over the period 1936–2020, using Scopus and WoS as bibliographic databases. In summary, the main countries, journals, authors, articles, and the main collaborative research networks at the level of authors or countries have been analyzed. In the same way, the implementation of strategic diagrams based on Callon’s procedure has facilitated the classification of the most important terms linked to financial cooperativism, which has served to detect future lines of research related to the terms (among others): asymmetric-information, capital-provision, cooperative-principles, customer-reduction, gender-issues, neoinstitutionalism, poverty, and urban-economy.
... This is of primary importance in deprived localities where information asymmetry is greater and where members have little or no collateral or credit history (Mersland, 2011). Despite the inherent safeguards, the risk of default is higher in deprived localities, and Ward and McKillop (2005) report that credit unions in deprived locations are more likely to have weaker financial performance. Therefore, given the link between member wealth and the risk of default, it is hypothesized that the potential for loan losses is greater in credit unions located in deprived localities: ...
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Loan book management is important to community credit union survival, particularly in deprived localities. Consistent with agency theory, prior studies of credit unions report an association between individual monitoring mechanisms, trade association monitoring and female board representation respectively, and reduced loan losses. This study provides a more nuanced understanding by investigating the moderating influence of these monitoring mechanisms on the relationship between loan losses and deprivation and by considering the effect of bundle combinations of different levels of the two monitoring mechanisms on loan losses. The results reveal that credit unions subject to trade association monitoring have the lowest loan losses. However, in the absence of trade association monitoring, female board representation has a moderating effect on loan losses as deprivation increases. Finally, trade association monitoring and female board representation have a substitutive, rather than a complementary effect on loan losses.
... 3 Within the same credit union, members share common bonds, e.g., the same occupation, employer or geographic location. This bond reduces information asymmetry; thus, the credit union can grant a loan to a member based on that person's reputation (Bauer, 2015;Ward and McKillop, 2005). 4 Financial services provided by credit unions include interest-bearing business checking accounts and commercial loans, agricultural loans, and venture capital loans. ...
Article
A unique feature of the financial services industry is that both shareholder-owned banks and member-owned credit unions coexist and compete against each other. In this study, we investigate two research questions. First, we compare risk-taking by banks and credit unions, with an additional consideration as to how regulatory oversight (state or federal) relates to such risk-taking. Second, we examine how competition affects the difference in risk-taking between these two types of financial institutions. To answer both questions, we rely on a matched sample (by loan type, size, and county) of commercial banks and credit unions, covering the period between 2010 and 2017. We use three empirical proxies for risk-taking, the Z-score, measuring an institution’s insolvency risk, as well as the ratios of non-performing loans to total loans and loan charge-offs to total loans, measuring the credit risk. Our results suggest that banks tend to engage in more risk-taking than credit unions; however, state regulatory oversight reduces the risk-taking gap, especially in terms of the Z-score. We further find that competition induces different risk-taking behaviors in banks and credit unions. Our results are robust to several alternative specifications.
... The evidence supporting Gibrat's Law, those rejecting the law, and the findings reconciling both arguments are discussed below. Ward and McKillop (2005) for instance, investigated the relationship between firm size and growth of credit unions in the United Kingdom for the period 1994-2000. The study observed that smaller credit unions grow faster than the larger ones. ...
Article
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This study seeks to test the validity of Gibrat’s Law of Proportionate Effect for listed firms in Ghana over the period 2008-2017. The study also investigates whether firms’ profitability and leverage affect the validity of Gibrat’s Law. Employing the fixed effects regression technique, the results show that Gibrat’s Law does not hold for all firms when the effect of firm size on growth is directly examined. In the presence of profitability, Gibrat’s Law is valid for both financial and non-financial firms. The findings further observe that, while Gibrat’s Law holds for non-financial firms in the presence of leverage, it is rejected for financial firms. Given the direct and significant impact of size on firm growth, the study concludes that Gibrat’s proposition that the growth rate of a given firm is independent of its size does not hold for listed firms in Ghana. The study discusses relevant recommendations based on the findings.
... Following prior research (Campbell & Mínguez-Vera, 2008;Gallego-Álvarez et al., 2010), company size is measured as the natural logarithm of the total assets (represented by LnAssets) at the end of the period. Economies of scale are obtained in large companies, because they can hire more experienced managers (Ward & McKillop, 2005), which positively affects their financial performance (Ward & Forker, 2017); otherwise, a larger size involves more complexity and higher costs of monitoring, leading to a deterioration in company performance (Campbell & Mínguez-Vera, 2008;Adams & Ferreira, 2009;Carter et al., 2010;Böhrem and Ström, 2010;Isidro & Sobral, 2015;Reguera-Alvarado et al., 2017). ...
Article
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The European Commission has proposed that member countries develop their national self-regulation and governance initiatives to increase the number of women on corporate boards with the aim of promoting gender equality in the processes of decision-making. This has provoked some controversial opinions, which in turn has led to the search for factual data which may support the legal initiatives. In order to shed more light on this topic, this study investigates the influence of a higher percentage of women on the board of directors of companies (excluding financial companies) included in the index of the Spanish Stock Exchange IBEX35 for a fifteen-year period: 2003–2017. To do this, we use a two-stage instrumental variables (IV) regression to address endogeneity and reverse causality problems. Moreover, we study the influence of a mandatory law on female presence on company boards by using a panel data methodology. The findings of this study show that the increasing number of women on boards is positively related to higher financial performance. Moreover, as expected, the gender mandatory law boosts the female proportion on boards of directors. Consequently, there are valid business as well as ethical arguments to support mandatory gender legislation.
... A relevância do cooperativismo de crédito para as microfinanças é ressaltada por Ward e McKillop (2005), os quais consideram que as características específicas desse tipo de instituição contribuem para reduzir a assimetria de informação, permitindo-lhes fornecer empréstimos de maneira e em locais em que outras IFs não podem, tornando-as, assim, um potencial instrumento de inclusão financeira. ...
Article
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This study investigates whether the performance of credit unions that offer microcredit in Brazil was affected by the advent of Crescer - the National Microcredit Program. This research fills a gap in the literature because few papers investigate credit unions that work with microcredit and also the effects of governmental interventions related to microcredit operations. Studies of this type may help evaluate the impact of governmental interventions on the performance of the institutions that are directly or indirectly affected. Our results add to the debate about microcredit and about the inclusion of credit unions in this market. In particular, our evidence may influence the design of public policies and the strategies of microfinance institutions, which typically combine economic and social objectives. Based on the literature, we calculate fifteen indicators for each credit union, related to their financial and social performance. The inferences are based on the implementation of the difference in differences estimator using the advent of Crescer, in 2011, as the exogenous event of interest and including in the control group the credit unions that did not provide microcredit loans throughout the sample period. This research presents evidence that the volume of clients and microcredit operations performed by Brazilian credit unions was positively affected by regulatory changes that took place in 2011, consistently with the objectives of the governmental intervention. The evidence also suggests that the governmental intervention did not harm the financial sustainability of the credit unions. The main changes are: a substantial reduction of interest rates and transaction costs, the implementation of subsidies to participants in the program, and a push for public banks to enhance their supply of productive and oriented microcredit.
... In the U.K., credit unions were slower to develop than either in Canada or the U.S., the first ones emerging in the 1960s and the movement never attaining the scale found in Canada and the U.S. (MacPherson, 1999). A comprehensive study of U.K. credit unions (Ward & McKillop, 2005) looked at success, utilizing the measures of payouts of patronage dividends and administrative efficiency. The research found that larger credit unions were the most successful as were those located primarily in wealthier areas. ...
Article
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This study of credit union and bank branch locations and neighbourhoods in Canada seeks to discover if there is a distinct credit union niche. The study builds on an earlier paper of credit unions and banks in the US which found that credit unions in Wisconsin, Arizona and New Hampshire were more likely to be located in lower-income areas than bank branches (Mook, Maiorano & Quarter, 2015). In Canada, we find that credit union branches are over-represented in rural areas, and under-represented in large population centres relative to bank branches. Additionally, credit unions are overrepresented in middle income areas and underrepresented in high income areas compared to bank branches both at the national level and in all provinces where differences are statistically significant. Another significant finding is that while both credit unions and banks cater to marginalized communities, the type of marginalized communities they cater to distinguishes them. Making use of the Canadian Marginalization Index, we find credit union branches in Canada to be overrepresented in communities marginalized along the dimensions of Material Deprivation and Dependency, while bank branches are overrepresented in communities marginalized along the dimension of Residential Instability and Ethnic Concentration.
... Tra i vantaggi della piccola dimensione è possibile individuare: a) il radicamento sul territorio e i forti legami con le comunità locali di riferimento che permettono di supportare lo sviluppo economico locale (Petersen, Rajan, 1994;Stein, 2000); b) la possibilità, legata al requisito del radicamento sul territorio, di ridurre le asimmetrie informative tra prenditori e datori di fondi. Tale capacità costituisce una fonte importante di vantaggio competitivo specie quando si analizza la funzione di finanziamento delle BCC a favore delle imprese di piccole dimensioni, le quali sono in genere contraddistinte da opacità informativa e da scarsi incentivi a fornire informazioni al mercato (Ward, McKillop, 2005;Angelini, Di Salvo, Ferri, 1998;Stein, 2000). La capacità dell'intermediario creditizio di ridurre il grado di asimmetria informativa in questo specifico segmento di mercato viene a costituire un elemento di valutazione essenziale delle condizioni concorrenziali e ciò pone le Ban- 22. Tra queste troviamo la partecipazione in Beni Stabili, società di gestione del fondo immobiliare chiuso Securfondo, collocato dalle Banche di credito cooperativo, nonché la partecipazione in Etica Sgr, attiva nella proposta di prodotti di risparmio con specifici connotati di responsabilità sociale. ...
... This capability represents an important competitive advantage especially when analysis is made of the mutual banks function of financing small firms, which are generally characterized by a lack of informational transparency and which have insufficient incentives to provide the market with information (Ward, McKillop, 2005;Angelini, Di Salvo, Ferri, 1998;Stein, 2000). The credit intermediary's ability to reduce the degree of informational asymmetry in this specific market sector becomes an essential element for the evaluation of competitive conditions and this places the mutual banks in a decidedly pre-eminent position on the market; iii) the ability to develop forms of relationship banking based on the management of unstructured information (soft information) acquired in the course of time on the individual customer, which in many cases involve the establishment of exclusive credit relationships. ...
Article
This work analyses some aspects of cooperation, mutuality and commitment to the local community in the banking sector with specific reference to mutual banks (banche di credito cooperativo) which were first created in Italy around 1860, principally in response to the negative economic situation of that period, and subsequently developed significantly as a result of the way they were administered. This development should be related to the dynamics of the pluralistic Italian banking system which until the 1990s was characterized by the presence of a wide variety of types of banks ranging from the predominant public banks to the private ones.
... They account for a very small share of the UK financial market, but are seen to have a big role in combating social exclusion. For more on the functioning of credit unions in general, see Ryder and Baker (2003), Ward and McKillop (2005), McKillop et al (2007), and Chambers and Ryder (2008). For evidence of similar problems with their governance that we have highlighted for building societies herein, see Davis (2001), Leggett and Strand (2002), and Bauer, Miles and Nishikawa (2009). ...
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Analysis of the recent financial crisis has tended to focus upon “market” and corresponding “regulatory” failures. While this provides important insights, it may neglect deeper issues at the root of recent problems. In this paper, we take a broader perspective, drawing upon the stategic choice approach to the theory of the firm (Cowling and Sugden, 199829. Cowling , Keith and Sugden , Roger . 1998. The essence of the modern corporation: markets, strategic decision-making and the theory of the firm. The Manchester School, 66: 59–86. [CrossRef], [Web of Science ®]View all references, 199930. Cowling , Keith and Sugden , Roger . 1999. The wealth of localities, regions and nations: developing multinational economies. New Political Economy, 4: 361–378. [Taylor & Francis Online], [CSA]View all references). We present a governance-based analysis which emphasises the process of engaging interested “publics” in corporate decision-making processes. We illustrate our arguments with respect to three UK cases – Northern Rock, Bradford and Bingley, and HBOS banks – which each required major interventions by the UK Government and whose recent history reveals significant changes in ownership, governance and corporate strategy. We argue that the current period of reform for these former building societies represents an ideal opportunity to address serious concerns over governance within the financial sector, and we propose a revised mutual solution as one appropriate way forward.
... Furthermore, in 2005 the journal Annals of Public and Cooperative Economics published a monographic issue devoted to analyzing the performance of Credit Unions using case studies in different countries as a basis. Among the articles published, it is worth highlighting the research by Goddard and Wilson (2005), who assessed the performance of Credit Unions in the USA using econometric analysis; Desrochers and Fischer (2005), who analyzed the influence on performance of different modes of association-integration in Credit Unions in several countries; and finally Ward and McKillop (2005) who studied the determinants of performance of the Credit Unions in the UK using econometric analysis. ...
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Labour Societies and Cooperatives are both Social Economy enterprises, but with noticeable differences, some of which are imposed by legislation in Spain. The aim of this paper is to study whether such differences affect their management capacity and, in particular, efficiency. In doing so, Data Envelopment Analysis techniques and the metafrontier approach proposed by O’Donnell et al. (2008) are used on a sample of Spanish Labour Societies and Cooperatives belonging to the building industry. Scores of technical efficiency and metafrontier ratios are computed at firm level and, as a novel contribution to existing literature in this field of research, at input‐specific level. The main finding shows that Cooperatives enjoy some technological advantages over Labour Societies, particularly in regard to the management of labour, fixed assets and current assets.
... Evidence from the delivery of the Growth Fund is that external support, properly directed and managed, can prompt secure organisational growth in Britain as it does internationally (Arbuckle, 1994; Arbuckle and Adams, 2000; Jones and Goggin, 2007). McKillop et al. (2007), as well as Goth et al. (2006) and Ward and McKillop (2005), base their analysis of the adverse effects of government funding on credit union stability on statistical data drawn from the 2001 credit union financial returns. This was the last year that credit union data was generally available; subsequently the Financial Services Authority adjudged such data as commercially sensitive and that it could no longer be placed in the public domain. ...
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This paper offers an analysis of the changing role of co-operative credit unions in tackling poverty and promoting financial inclusion in Britain. It examines the reality of poverty in low income communities and endeavours to critique the actions, methodologies and initiatives currently being adopted by credit unions to achieve financial inclusion. It examines the role of the UK government in its support for credit unions and offers an early analysis of HM Treasury's Financial Inclusion Fund. The paper argues that credit unions are best placed within the financial services industry to make an impact within financially excluded communities.
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Related party transactions are a key factor to the sustainability of Savings and Credit Cooperatives (SACCOs). In view of this fact, loans to directors and staff are viewed as a factor which can greatly influence savings and credit cooperatives into either falling into financial distress or helping them to remain a float and become financially stable entities. The stakeholder theory holds that entities should be managed a manner that will satisfy every stakeholder. The stewardship theory reiterates that managers have the organisation at heart and can it to profitability as if it were their own. However approval of loans and other transactions to managers and staff, may not positively impact the entity. This study was designed to establish the effect of related party transactions on the relationship between board characteristics and financial distress of deposit taking SACCOs in Nairobi County. We applied Descriptive research design on Deposit taking SACCOs in Nairobi County which was identified purposively while a census was conceded for all deposit taking SACCOs in the county. We obtained secondary data from SASRA using a data collection sheet after which we performed panel data analysis by use of STATA software. Findings were presented using tables. The study concluded that related party transactions influenced the relationship between board characteristics and financial distress of Deposit Taking SACCOs in Nairobi County. Related party transactions can be an avenue of causing financial distress and should be kept as low as possible. The regulator should come up with a tool based on Altman’s Z score models to predict financial distress in SACCOs in order to offer timely advice to alleviate more distress and consequent bankruptcy which may lead to closure of SACCOs. Another research may be carried out to establish other factors causing financial distress and how to turn around the SACCOs already in distress.
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The importance of Savings and Credit Cooperatives (SACCOs) cannot be underestimated. Despite their importance, they are faced with numerous challenges among them financial distress which threatens their very existence. The current research sought to establish the role of board characteristics in the financial distress suffered by Deposit Taking SACCOs in Nairobi County. The study is anchored inter alia on Agency Theory. Descriptive research design was adopted while Nairobi County was purposively chosen and a census was carried out on deposit taking SACCOs in the county. Secondary data was collected from SASRA using a data collection sheet and a panel data analysis performed using STATA software. The findings were presented using tables. The study concluded that there was a relationship between board characteristics and financial distress of Deposit Taking SACCOs where board composition, board education and board tenure have statistically significant and negative influence on financial distress. In conclusion SACCOs need to have lean boards, Board composition should also be improved by including more women on boards, there should be more inclusion of members with high and relevant education credentials, and SACCOs should have term limits for their members while an analysis too based on the Altman's Z score models should be adopted for SACCOs. Another research may be carried out to establish other factors causing financial distress and how to turn around the SACCOs already in distress.
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Performances of mosque co-operatives rely on the effectiveness of the board of governance. The board has responsibilities to determine the strategic direction of mosque co-operatives, oversight management, and ensure the integrity of members’ rights and interests. The board of governance functions is becoming more challenging since the launching of National Co-operative Policy II (2011-2020), which among another, place greater emphasis on the expansion of mosque co-operatives movement via initiative of 1 Community, 1 Co-operative. Furthermore, the board of governance of mosque co-operatives is expected to deliver not only economic performance but also socio-economic governance, especially in supporting the activism of mosque institutions. Hence, as an initial observation, this study attempts to highlight the board governance attributes and mosque co-operatives organisational characteristics. The initial findings are essential in assisting regulator and policy maker like Ministry of Domestic Trade, Co-operative, and Consumerism (KPDNKK), Malaysia Co-operative Societies Commission (SKM), and Malaysia National Co-operative Movement (ANGKASA) in preparing the Mosque Co-operative Strategic Plan 2017-2020, and National Co-operative Policy III (2021-2030).
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This paper examines the disclosures made on English credit unions’ websites. Credit unions without a website are presumed to be small. Community credit unions with websites tend to offer basic services with a limited range of products that may appeal to poorer members of society. Occupational credit unions appear more likely to have a greater range of products.
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This paper gives an overview and analysis of the development of the British credit union movement, and highlights current major challenges facing the sector. In 2013, the British Government announced a 35.6 million pounds investment into the sector through the Association of British Credit Unions to support its expansion within British society, particularly within low- and moderate-income communities. The paper will explore the background to this government investment as well as the dynamics of the strengthening and expansion programme it will support. A key element of the expansion programme is the migration of a group of lead credit unions onto a collaborative and shared electronic operating system.
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This paper evaluates the efficiency of the Social Economy sector in Asturias, by applying the nonparametric method of Data Envelopment Analysis (DEA) proposed by Charnes et al. (1978). For the elaboration of this study we used a sample of 397 Asturian cooperatives and labor societies for biennium 2004-2005. We calculate the measure of its performance by applying the DEA technique to a model of performance based on the account of operating income under output orientation, using the methodology of program efficiency proposed by Charnes et al. (1981). In a second stage of this research we evaluate the main factors determining the performance of these entities in the same period of analysis.
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Nos ultimos anos, ocorreram importantes alteracoes normativas no Brasil relacionadas ao cooperativismo de credito. Merece destaque a edicao da Resolucao CMN 3.106/03, que permitiu a criacao de cooperativas de credito de livre admissao, e a transformacao das cooperativas de credito existentes nesta nova modalidade. As cooperativas de credito estao entre as instituicoes financeiras menos estudadas no Brasil e, de modo geral, e grande o desconhecimento sobre o tema. Neste contexto, este artigo procurou estudar a importância das cooperativas de credito e o desempenho do setor com foco na inadimplencia de suas carteiras de credito. Finalmente, o Modelo de Equacoes de Estimacao Generalizadas (GEE) e utilizado, a fim de verificar se houve alguma mudanca nesse indicador que pudesse ser atribuida a transformacao das cooperativas de credito para a modalidade de livre admissao, ao sistema cooperativista de credito a que pertenca ou ao seu tamanho.
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Credit unions are membership-based cooperative financial services organizations that are run by and for their members. Historically, credit unions provided financial services for their members and encouraged community development through philanthropy and volunteering. The World Council of Credit Unions (WOCCU), the sector’s global trade association and development agency, encourages the adoption of a management model, coined “new model,” which encourages for-profit financial management practices. The “new model” approach is challenged by some practitioners and academics concerned that it will diminish the community involvement of credit unions. We explore the following research question: “Does the implementation of a management model that promotes for-profit-style financial management crowd out the community impact of credit unions?” We use a dataset extracted from 2,275 annual returns for 188 credit unions spanning 1996-2008, and find no evidence that community impact diminishes as a result of “new model” operating practices, suggesting a crowding-out effect is absent.
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Purpose – The UK's financial watchdog, The financial services authority (FSA) took over prudential regulation and control of credit unions on 2nd July 2002. The purpose of this paper is to assess the impact of the new regulatory framework and its impact on the continued poor perception of credit unions among users of financial services products. It also aims to assess what the future may hold for the direction of the UK credit union sector. Design/methodology/approach – An assessment is made of the impact of the new regulatory framework and its impact on the continued poor perception of credit unions among users of financial services products. Also, an assessment is made of what the future may hold for the direction of the UK credit union sector. Findings – The paper finds that credit union membership is growing, as are members’ deposits and loans, however at the same time the numbers of individual credit unions are falling. Overall, with supervision and regulation passing to the FSA, the outlook for credit unions in the UK is better than at any time in their history. The result of the new regime will ultimately lead to a strong, secure and professional credit union sector, capable of meeting the credit needs of a wide range of persons. Originality/value – The paper provides a useful overview of the history and present status of UK credit unions, and the effects of recent legislation and regulation.
Article
Credit unions are financial co-operatives that conduct their business for their members. The principal purpose of a credit union is to receive deposits from and make loans to members. They do not serve the general public. Membership is restricted by a qualification that is referred to as a common bond or field of membership. The origins of credit unions are to be found at the heart of the Industrial Revolution, when Robert Owen established two famous co-operatives in Rochdale and New Lanark. The most prominent co-operative influenced by his ideas, the Rochdale Society of Equitable Pioneers, opened their famous co-operative shop on Toad Lane in 1844. This was an important step in the social and political change that was taking place throughout Europe and of which the people of Rochdale can justifiably claim to be leaders. By 1848, the Co-operative had 140 members and the society's membership increased to 390, by 1880 the national membership of consumer societies had reached over 500 000, and by the turn of the century it had reached 1.5 million. The members of the two co-operatives subscribed to shares and paid small amounts to raise sufficient funds in order to purchase goods below the market value and then resell them to the members at a savings. These co-operatives were the result of the `growing complexities of modern economic life for both farmers and workers'. Importantly, the Rochdale Society of Equitable Pioneers developed a number of principles that have assisted the development of credit unions. These principles were open membership, the democratic control of the organisation, a limited interest on share capital and the return on member's interests being in proportion to the member's patronage. These principles illustrate why credit unions are a unique financial co-operative. Under the guidance of the World Council of Credit Unions, the growth of credit unions has been remarkable. In 2007, there were 49 000 credit unions and 177 000 000 members in 96 countries. The aim of this article is twofold. First, it aims to illustrate how credit unions are able to grow in times of economic hardship - a situation that is demonstrated by examining the impact of the `Great Depression' in the United States of America (USA) and the `Credit Crunch' in the United Kingdom (UK). Second, the article highlights the importance of deposit protection schemes when credit unions face financial difficulties in the USA, UK and the Republic of Ireland (Ireland).
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The aim of this article is to critically assess the impact of government funding upon the growth of credit unions in the United Kingdom (UK) in light of the unprecedented level of financial support provided by the Labour government since 1997. The article begins by defining a credit union and commenting upon their importance towards the reduction of financial exclusion. The article challenges the findings of several studies that have determined that external funding has limited the development of credit unions. This is illustrated by the use of four case studies.
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The origins of the cooperative movement can be traced to the Rochdale Society of Equitable Pioneers in 1844, from which similar institutions emerged in Central Europe, the North American continent and the rest of the world. Modern credit unions evolved from these small cooperative societies and have developed into mainstream providers of financial services in many jurisdictions. However, credit unions in the UK have not made a similar impact. There are several factors that have limited their growth – an inadequate legislative framework, an ineffective credit union regulatory system, inappropriate development models, an over-reliance on state subsidies and a disunited movement. The aim of this paper is to re-examine these factors in light of the level of political support provided by the government since 1997.
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ABSTRACT‡: Research into the benefits of mergers in small financial institutions, in particular credit unions, is sparse. This study helps to fill this gap by analyzing recent intense merger activity in New Zealand credit unions. The major driver for these mergers was not the usual reason of attempting to increase efficiency for competitive purposes but rather enforced government action. Data envelopment analysis is used to explore changes in efficiency in merged credit unions between 1996 and 2001. Those credit unions not involved in merger activity are used as a control group. Overall, credit unions have become more efficient over the period, notably in those that undertook mergers. The Malmquist index indicates significant technological progress over the period but a slight regression in terms of efficiency.
Article
This article questions the findings of several studies which have concluded that the Credit Unions Act 1979 was a factor limiting the growth of credit unions in the United Kingdom (UK). The author’s conclusions are based upon an analysis of the amendments to the Credit Unions Act 1979 introduced by the Financial Services Authority (FSA). As a result, the 1979 Act now reciprocates the controversial, yet flexible United States (US) legislative framework. In particular, the article examines the interpretation of the common bond, the provision of financial services and the regulation of credit unions. The article concludes that these three statutory provisions have assisted the growth of credit unions in both countries and not limited their development. However, the growth of credit unions has come, at the expense of their unique status and philosophy. It has made US credit unions, in particular, indistinguishable from banks. This is a problem which may affect credit unions in the UK. The article concludes that the Credit Unions Act 1979 did not limit their development, but acted as a galvanising factor for credit union expansion.
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The government has been actively encouraging the development of credit unions to help the financially excluded. However, rather than stimulating credit union development, government grants can erode the community self-help ethos on which credit unions are founded. Policies should be formulated which encourage credit union development based on a membership drawn from a cross-section of the population.
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Whereas for much of the 1980s the financial services industry was characterised by growth and expansion, the late 1980s and early 1990s was a period of redundancies and financial losses. This paper seeks to explain this reversal of fortune and the responses of the financial services industry. The restructuring of the financial System at a global level, through a process of disintermediation, and at a national level, in response to financial re-regulation, led to an intensification of competition between financial institutions and helped produce a developed countries debt crisis, founded in personal and corporate indebtedness. In the wake of this crisis, the financial services industry has been in transition. Bureaucratic labour market models have been overturned in favour of more flexible variants, while at the same time many financial services firms have engaged in the wholesale spatial reorganisation of their activities. One important consequence has been a process of ‘financial infrastructure withdrawal’, by which services and operations are withdrawn from certain social groups and certain localities. This process, which revolves around a rubric of risk reduction and a ‘flight to quality’, has introduced an element of exclusion and closure to the operation of financial Systems within developed countries. In this sense, the reaction of the financial services industry to the developed countries debt crisis mirrors that which followed the less developed countries debt crisis of the early 1980s; that is, abandonment and retreat to a more affluent client base. As was the case during the less developed countries debt crisis, the current process of financial infrastructure withdrawal has serious social and economic implications for those social groups and localities abandoned by the financial community.
Article
Credit unions have failed to develop in the United Kingdom in comparison with other jurisdictions. This is due, in part, to a restrictive legal framework and to policies adopted by local authorities and the UK government towards their development. However, it is their association with financial exclusion that has had the most detrimental impact upon the expansion of credit unions. The UK government perceives credit unions as filling the gap left by the banking industry in communities across the United Kingdom and has made recommendations to assist their development. The implementation of the recommendations is dependent upon the support of the banking industry. These developments and this context for implementation are considered in the light of the association of credit unions with issues of financial exclusion.
Article
Since the late 1980s the number of community-based credit unions in Britain has grown steadily. These are financial co-operatives based on low-income neighbourhoods, owned and controlled by local residents, which aim to provide savings and low-cost credit facilities to their members. Although located in economically disadvantaged communities, credit unions are not exclusively used by the poor. While better-off groups save and borrow more, a greater proportion of low-income users would not have purchased goods and services in the absence of a credit union. Credit unions are making useful but marginal contributions to the credit and debt problems of low-income families. They could probably achieve more with additional resources, but any intervention by external agencies should be sensitive and avoid damaging the strong mutual aid foundations upon which credit unions are based.
Article
One vision of organizational evolution suggests that old and large organizations become increasingly dominant over their environment. A second suggests that as organizations age they become less able to respond to new challenges. In this article the authors investigate which of these visions best characterizes the evolution of state-chartered credit unions in New York City from 1914 through 1990 by analyzing the effects of organizational age, size, and population density on rates of organizational failure and growth. The authors find evidence that old and small institutions are more likely to fail, while young and small organizations have the highest growth rates.
Article
English The British government’s desire to tackle financial exclusion is resulting in growing interest in credit unions (community-based financial services cooperatives). This article draws on research undertaken in Scotland to analyse the credit union support network. There are tensions in this: between those who see credit unions as small, area-based poverty-alleviating initiatives and those who feel unions can only survive if they serve larger areas. By making comparisons with other initiatives, an attempt is made to put the current support framework in context. The article concludes by raising a number of issues that should be addressed if more support is to be given to unions: in particular the need to be clear about objectives and to understand the role that credit unions might realistically play in tackling financial exclusion.
Article
Data envelopment analysis is used in this study to provide measures of the efficiency of individual credit unions in the Australian state of Victoria in the period 1992–5. The resulting measures are consistent with those reported in comparable studies. There is no evidence that over the period of the study, the ‘average’ credit union moved closer to the efficient frontier. Efficiency measures are analysed according to the bond of association and the results are consistent with the proposition that a tighter bond will tend to reduce operating costs. In the period of the study there were a large number of exits by merger, including exits by small credit unions with high efficiency measures. Possible explanations in terms of the expected benefits to the members of acquiring and exiting credit unions are suggested and evaluated.
Article
The aim of this paper is to analyse credit union industries within a development framework. Explicit consideration is given to credit union industries in four countries – Great Britain, Ireland, New Zealand and the United States. It is argued that in terms of a developmental typology the credit union industry in Great Britain is at a nascent stage of development, the industries in Ireland and New Zealand are at a transition stage while the US credit union industry is mature in nature. In progression between stages the analysis considers the influence of factors such as situational leadership, the complexion of trade associations, professionalisation, regulatory and legislative initiatives and technology. The analysis concluded that while there was a substantial commonality of experience, there were also significant differences in the impact of these factors. This consequently encouraged the recognition of the existence of ‘a variety of the species’ in respect of credit union development.
Article
For a special edition of Geoforum on socio-spatial exclusion, credit unions unexpectedly have it all—a financial institution currently at the margins of both the economy and society generally, rigid demarcation of boundaries, exclusionary territories and tendencies, power relations, and most excitingly the possibility for a geography of financial inclusion. Whilst most analyses have effectively treated credit unions as unsocial, uncontested spaces of purely economic considerations, this paper enters into the interrelational, and social space of the credit union study group. In so doing, it illustrates two interesting paradoxes at the heart of credit union operations. Firstly, it suggests a number of potential exclusionary effects recent deregulatory legislation has on the demarcation of common bond boundaries. Secondly, it illustrates how common bond boundary construction initiates a purification of financial space, but argues that the act of boundary formation itself is ultimately exclusionary in nature. Awareness of such issues on the part of the credit union development community of Kingston Upon Hull is highlighted through recent changes in the city's overall credit union development strategy.
Article
Public concern with poverty derives in large part from the assumption that low income families cannot afford necessities. Yet official poverty statistics focus on measuring income, not on measuring material hardship. Two surveys of Chicago residents measure whether families could afford food, housing and medical care. A family's official income-to-needs ratio explained 24 percent of the variance in the amount of material hardship it reported. Adjustments for family size, age, health, noncash benefits, home ownership, and access to credit explain another 15 percent. Variations in permanent income explain almost none of the remaining variance in hardship. Among families with the same official income-to-needs ratio, material hardship varies by age, family size and composition.
Article
Both poverty research and social policy employ a variety of poverty definitions. The choice of one specific definition has major consequences for the resulting poverty population. This paper uses eight different definitions of poverty to determine who is poor, using a 1983 Dutch sample of more than 12,000 households. Poverty according to each of these definitions is compared over different subgroups. The relevance of the choice between definitions for social policy is shown by the presentation of poverty percentages according to the various definitions, which vary widely.
Article
Over the past twenty years there has been an upsurge of interest in the credit union movement. They claim to play a key role in community development and regeneration. Against a background of increasing financial exclusion and debt , its has been suggested that the community development focus of this movement is a key factor in its success. This paper based on a large community based organization suggests that there is a considerable discrepancy between what the organization claims its contribution to the community is and how the members view its role. It is suggested that their contribution to community development is limited to providing a savings and low cost loans service. Their claims to evoke a community spirit, sense of solidarity and empowerment are largely rhetoric. It is concluded that the credit union movement must re‐assess and re‐examine its aims as it is in danger of becoming seen simply as another financial institution.
Article
This study utilizes a paired difference approach to investigate for the existence of scale economies in UK credit unions. The analysis is conducted for both credit unions in aggregate as well as a number of sub-groups with the latter defined in terms of the trade organization to which credit unions are affiliated. This decomposition was viewed as particularly important in that the respective umbrella organizations have different growth strategies. The analysis revealed that significant efficiency gains are available through credit unions adopting a policy of asset growth. This finding held good irrespective of the umbrella organization to which credit unions belong although the analysis also revealed that the opportunity for efficiency gains was not so pronounced for the members of one of the trade organizations - the National Federation of Credit Unions. This finding was due to the NFCU's much more overt emphasis on self-help and community development, particularly in areas of economic disadvantage.
Article
When employing the Benston-Bell-Murphy cost specification, most studies on economies of scale in financial institutions have consistently found small, yet significant economies. However, when a similar approach on credit unions was used, the results were conflicting. This paper, through the use of a different methodological and statistical approach, provides additional evidence on the existence of economies of scale in credit unions.
Article
At present there are 597 credit unions operating within the UK with their growth, be it defined in term of new credit union establishment, asset growth or membership growth, placing them as the fasting growing financial grouping in the UK over this last decade. The fundamental motivation of a credit union is to provide financial services to its membership, in particular a depository for savings and an access to consumer credit. As a practical problem there are, however, a number of reasons why credit unions may achieve a less than perfect balance in the treatment of borrowers and savers. For example, maintaining low loan rates may reduce the credit union's ability to offer high dividend rates while the maintenance of high dividend rates may require higher loan rates. Consequently, the competing pull of these two objectives may result in the emergence of conflict between those credit union members who on the one hand are net savers and those that are net borrowers. If such conflict does emerge it is then likely to place in jeopardy other aspects of a credit union's function most notably their role as financial counsellors and promoters of thrift within low income communities. The approach taken in this study is to derive an index of member group imbalance and then to employ this index to determine whether member group imbalance has an adverse impact upon the generation of total benefits by individual credit unions. The analysis demonstrates that there is a strong pro-borrower bias in the operation of UK credit unions with this pro-borrower bias driven by the regulatory environment within which they operate.
Article
Households have experienced an expansion of financial opportunities over the past several decades. Expanded financial opportunities, such as the democratization of credit and new lending approaches, can yield benefits in terms of household economic security. However, the financial crisis that began in 2007 has powerfully illustrated that expanded financial opportunities can also pose dangers for households. By increasing the scope for investment in risky assets, people may end up with larger swings in wealth than they had anticipated. Households may borrow too much and then face obligations that are unsustainable given their resources. To explore these issues, I examine household data on wealth, assets, and liabilities going back 25 years and, in some cases, 45 years. I argue that changes in household finances in the decades leading up to the mid-1990s -- including the gradual rise in indebtedness -- likely increased household well-being, on balance, and contributed to a decline in aggregate economic volatility. However, changes in finances since the mid-1990s -- in particular, a much sharper rate of increase in household debt -- appear to have been destabilizing for many individual households and ultimately for the economy as a whole. I consider how the lessons learned in the current crisis might change household financial opportunities and choices going forward.
Article
As member-owned, not-for-profit financial institutions, credit unions are an important instrument of public policy, particularly in pushing forward measures to tackle financial and social exclusion. Historically, the credit union movement in Great Britain has been hampered by a number of factors, including a lack of leadership, a cohesive identity and regulatory impediments. Recent legislative review and change has provided credit unions with the opportunity to grow and extend the scale and scope of services they can offer to their members. However, policy-makers should be aware that funding initiatives to support credit union development might undermine their self-help cornerstone and weaken the future development of the movement.
Article
This study examines credit union size-growth relationships within the context of Gibrat's law of proportionate effect. This relates to the hypothesis that the growth of each firm in each period is random. The analysis covers the period 1994 to 2000 and is undertaken separately for the United Kingdom (UK) and its regions, Northern Ireland, England & Wales and Scotland. Sample attrition is a characteristic of the data and to avoid the problem of survivorship bias the inverse of the Mill's ratio, obtained from a probit regression for surviving credit unions, is introduced into the estimating relationship. In terms of the empirical results, little evidence emerged to support the law of proportionate effect as a theoretical paradigm. Although not universal, three broad findings emerged. First, small credit unions on average grow faster than their larger counterparts, although there was also some evidence of non-linearity in this relationship. Secondly, growth persistence pertained with credit unions which experienced above average growth (below average growth) in one period, experiencing above average growth (below average growth) in the next. Thirdly, variability of growth was not independent of size with the cross-sectional variance of the error term inversely related to size suggesting that small credit unions have greater growth variability than larger ones. Copyright Blackwell Publishers Ltd, 2005.
A time to grow and a time to die: growth and mortality of credit union in New York City
  • Donal G Mckillop
BARRON D.N., WEST E. and HANNON M.T., 1994, ‘A time to grow and a time to die: growth and mortality of credit union in New York City, 1914–1990’, American Journal of Sociology, 100, 2, 381–421. 482 ANN-MARIE WARD AND DONAL G. MCKILLOP #CIRIEC 2005 rBERTHOUD R. and HINTON T., 1989, Credit Unions in the United Kingdom, Policy Studies Institute, Research Report 693
Economic and Social Research Council, November. MACPHERSON I., 1999, Hands around the Globe: A History of the International Credit Union Movement and the Role and Development of World Council of Credit Unions Inc., Horsdal and SchubartCredit unions and low-income communities
  • Leyshon A Pratt
  • Ann-Marie Ward
  • Donal G Mckillop #ciriec Mcarthur A
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  • Stewart R
LEYSHON A., PRATT J. and THRIFT N., 1997, Inside/Outside: Geographies of Financial Inclusion and Exclusion in Britain, Economic and Social Research Council, November. MACPHERSON I., 1999, Hands around the Globe: A History of the International Credit Union Movement and the Role and Development of World Council of Credit Unions Inc., Horsdal and Schubart, Victoria, Canada. 484 ANN-MARIE WARD AND DONAL G. MCKILLOP #CIRIEC 2005 MCARTHUR A., MCGREGOR A. and STEWART R., 1993, 'Credit unions and low-income communities', Urban Studies, 30, 2, 399–416.
Accountability: A Study of Irish Credit UnionsTowards sustainable credit union developmentFrom small acorns to strong oaks: a study into the development of credit unions in rural EnglandInvidious competition or benevolence: does not-for-profit status constrain the behaviour of credit unions?
  • Hyndman N Mckillop
  • D G Ferguson C
HYNDMAN N., MCKILLOP D.G., FERGUSON C. and WALL A.P., 2001, Accountability: A Study of Irish Credit Unions, Oak Tree Press, Cork. JONES P.A., 1999, 'Towards sustainable credit union development', Research Report, ABCUL. JONES P.A., 2001, 'From small acorns to strong oaks: a study into the development of credit unions in rural England', Research Report, Countryside Agency. KEATING M.O. and KEATING B.P., 1989, 'Invidious competition or benevolence: does not-for-profit status constrain the behaviour of credit unions?' Journal of Applied Business Research, 5, 2, 49–55.
Credit Unions in the United Kingdom, Policy Studies InstituteEfficiency, bond of association and exit patterns in credit unions: Australian evidence
  • Marie Ward
  • Donal G Mckillop #ciriec
  • T Brown
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