Income structure, diversification strategy and owners’ benefit in cooperative financial institutions

2020 ◽  
Vol 16 (4) ◽  
pp. 481-500
Author(s):  
Hoang Van Cuong ◽  
Hiep Ngoc Luu ◽  
Loan Quynh Thi Nguyen ◽  
Vu Tuan Chu
Keyword(s):  
Financial Institutions ◽  
Credit Unions ◽  
Credit Union ◽  
Least Square ◽  
Policy Implications ◽  
Diversification Strategy ◽  
Income Diversification ◽  
Significant Drop ◽  
Content Type ◽  
Common Bond

PurposeThe purposes of this paper are twofold. First, it analyses the income structure in cooperative financial institutions and examines how traditional and non-traditional incomes are related. Second, it evaluates whether increasing diversification towards non-traditional incomes facilitates or hampers the benefits of financial cooperative owners.Design/methodology/approachData are collected from over 3,100 US credit unions over the period of 1994–2016. A number of modern econometric techniques are employed throughout the analysis, including the use of panel fixed effect, generalised method of moments (GMM) and two-stage least square (2SLS) methodologies.FindingsUsing US credit unions as the empirical setting, the empirical results reveal that the expansion of traditional income leads to a corresponding increase in income from non-traditional activities. However, an increasing reliance on non-traditional income causes a significant drop in interest margins. The authors also find that the extent to which income diversification affects owner benefit varies across credit union types and period of time. While income diversification negatively affects owners' benefits in single common bond credit unions, it has no significant influence on multiple common bond and community credit union owners' benefits. Third, diversification can be beneficial during crisis time, but can be detrimental to owner benefit during normal time.Originality/valueThis paper provides some of the first empirical investigations on the diversification strategy of cooperative financial institutions. Therefore, the results offer significant policy implications for policymakers and market participants on whether financial cooperatives should diversify or specialise.

A methodology for enterprise-wide risk assessment in small banks and credit union

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Philippa Duncan
Keyword(s):  
Risk Assessment ◽  
Risk Management ◽  
Money Laundering ◽  
Financial Institutions ◽  
Rapid Evolution ◽  
Credit Unions ◽  
Credit Union ◽  
Content Type ◽  
Financial Crimes ◽  
Compliance Program

Purpose This paper aims to provide an easy to follow, practical guide for small traditional banks and credit unions to conduct an enterprise-wide risk assessment of the financial institution’s anti-money laundering compliance program. Design/methodology/approach Information was collected from relevant documents published by global standard setters in the disciplines of anti-money laundering, financial crime prevention and risk management. The data was integrated with common challenges experienced by small financial institutions to produce an application-based guide that practitioners can readily implement. Findings Though not a new concept, macro-level financial crises and institutional level financial crimes have influenced the rapid evolution of risk management in financial institutions over the past three decades. Small unsophisticated banks and credit unions are expected to now perform an internal risk assessment. An abundance of information is available on risk assessment, but small institutions remain challenged in finding a turnkey document that is readily actionable to stimulate a less arduous undertaking, especially given the institutions’ limited resources. Research limitations/implications The setting reflects small deposit-taking institutions with traditional services. It is tailored for easy understanding and practical use by the institutions. Originality/value This could influence small institutions to conduct enterprise-wide risk assessments and formulate and use more specific risk management policies.

The Effect of Common Bond on Credit Union Performance: The Case of Black-Controlled Credit Unions

1987 ◽  
Vol 15 (4) ◽  
pp. 89-98 ◽  
Author(s):  
Harold A. Black ◽  
Robert L. Schweitzer
Keyword(s):  
Economic Development ◽  
Financial Institutions ◽  
Credit Unions ◽  
Credit Union ◽  
Institutional Characteristics ◽  
Common Bond ◽  
Black Economic ◽  
Black Economic Development ◽  
Financial Characteristics ◽  
Unique Relationship

This article compares the financial characteristics of black-controlled credit unions by type of common bond. The study found that many of the operational differences of these credit unions can be attributed to institutional characteristics associated with the three distinct types of credit unions. It also found that black credit unions are viable financial institutions, regardless of type of common bond. This finding is linked to the ownership of credit unions by its membership. This unique relationship has implications for black economic development.

Value proposition preferences of credit union members and patronage activity

2014 ◽  
Vol 32 (6) ◽  
pp. 567-589 ◽  
Author(s):  
Noreen Byrne ◽  
Olive McCarthy
Keyword(s):  
Financial Institutions ◽  
Financial Services ◽  
Credit Unions ◽  
Credit Union ◽  
Value Proposition ◽  
Content Type ◽  
Relational Value ◽  
Emotional Value ◽  
The Impact ◽  
The Relationship

Purpose – The purpose of this paper is to examine the technical and relational value proposition preferences of credit union members and to examine the relationship between their preference and patronage activity. Design/methodology/approach – A total of 800 members of credit unions were surveyed. Exploratory factor analysis was used and four factors were extracted incorporating technical and relational dimensions of the credit union service. Member value proposition preferences are examined and the relationship to patronage activity of the credit union was explored. Findings – The majority of members express a higher or equal preference for a relational rather than a technical value proposition. Those that express a greater or equal preference for relational value are more likely to have a higher level of patronage activity. Research limitations/implications – Credit unions are member-owned financial institutions and hence the study is context dependent. Credit unions are member-owned financial institutions and hence relational value may be more significant than in the case of non-member owned entities. Practical implications – The research highlights the importance of consideration of relational value in financial services entities whose competitive advantage lies in the relational. In terms of the credit union, the impact on the relational value proposition of the credit union must be considered in the design and implementation of industry restructuring. Originality/value – This paper extends the emotional value and interactive quality construct to incorporate a greater relational focus which the paper suggests is of greater relevance to high-contact financial services. The research in this paper also extends beyond the criticised static focus of consumer perceived scales (consumer perceived value) and the episode focused service quality scales. Hence, it has a more longitudinal and holistic focus. The paper also incorporates a preference between benefits approach rather than an evaluative or trade-off between benefits and costs framework.

Portfolio investment outflow and the complementary role of direct investment

2015 ◽  
Vol 7 (3) ◽  
pp. 190-206 ◽  
Author(s):  
Abdullah Noman ◽  
Mohammad Nakibur Rahman ◽  
Atsuyuki Naka
Keyword(s):  
Direct Investment ◽  
Relevant Literature ◽  
Explanatory Power ◽  
Least Square ◽  
Policy Implications ◽  
Portfolio Investment ◽  
Content Type ◽  
Foreign Portfolio Investment ◽  
Complementary Role

Purpose – This paper aims to uncover potential contemporaneous relationship between foreign portfolio investment (FPI) and another popular type of cross-border investment outflow, namely, foreign direct investment (FDI). Design/methodology/approach – The relationship between FPI and FDI are modeled using simultaneous equations approach to take potential endogeneity in to account. In a panel of 45 countries over the period of 2001-2009, FPI and FDI are found to be strategically complimentary to each other. Findings – The two-stage least square estimates suggest existence of both statistically and economically significant relationship between these two types of outflows. In particular, the FDI outflow has empirically significant predictive power in explaining the FPI outflow. Similarly, the FPI outflow also has significant explanatory power for the observed level of FDI outflow. Second, the FPI has greater explanatory power for FDI outflow than the FDI for the FPI outflow. Originality/value – The authors believe that the paper would contribute to the relevant literature in terms of its originality and scope. The empirical findings of the paper have valuable policy implications.

Factors affecting Canadian credit unions' financial performance

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Eman Almehdawe ◽  
Saqib Khan ◽  
Manish Lamsal ◽  
Angèle Poirier
Keyword(s):  
Panel Data ◽  
Financial Performance ◽  
Performance Metrics ◽  
Service Providers ◽  
Credit Unions ◽  
Credit Union ◽  
Fixed Effect ◽  
Capital Adequacy ◽  
Management Service ◽  
Content Type

PurposeThe purpose of this paper is to identify the factors that affect the Canadian credit unions' financial performance which play an important role in providing financial services to the agriculture sector.Design/methodology/approachWe surveyed the literature to identify different performance metrics of credit unions and a set of possible factors that might affect their performance. We collected data related to different dependent and independent variables from financial statements and balance sheets of 189 credit unions and from general websites like Statistics Canada and Bank of Canada. Then, we imputed the missing data and developed fixed effect and random effect panel data regression models. First, we used return on asset as the main dependent variable. Afterwards, we used six performance metrics to check the robustness of our models.FindingsFrom an initial list of 16 possible factors that might affect the financial performance of a credit union, we were able to narrow the factors down to the nine most significant ones. It was observed that credit unions in the prairies were more likely to perform well financially as compared to other provinces. Membership size, the size of a credit union in terms of total assets, capital adequacy ratio, market penetration, diversification of income, inflation rate and provincial GDP and interest rates were significant. The cross-sectional analysis performed confirmed the findings of the fixed effect panel data models.Research limitations/implicationsThis study has a limitation concerning the number of years included into the time series analysis. Only ten years worth of data were available.Practical implicationsResults provide credit union management, service providers for credit unions and market analysts with a current understanding of how different internal and external factors might affect return on assets, return on equity, delinquency, cash ratio, efficiency ratio, asset growth and loan growth. Our models can be used to predict financial performance of credit unions based on the defined significant variables.Originality/valueAlthough there is a wide body of literature that studies performance of banks, not many studies focus on credit unions. Moreover, the existing studies are based on credit unions in United States or Europe, and literature on Canadian credit unions is scarce. The data collected covered 189 Canadian credit unions. To our knowledge this is the first study that looks at the various internal, external and regulatory factors together that affect the credit unions in various jurisdictions of Canada.

Barriers to growth of SMEs in Western Balkan countries

2019 ◽  
Vol 38 (1) ◽  
pp. 2-24 ◽  
Author(s):  
Naqeeb Ur Rehman ◽  
Arjona Çela ◽  
Fatbardha Morina ◽  
Kriselda Sulçaj Gura
Keyword(s):  
Factor Analysis ◽  
Panel Data ◽  
New Technologies ◽  
Business Environment ◽  
Least Square ◽  
Policy Implications ◽  
Entrepreneurial Activity ◽  
Western Balkans ◽  
Cross Sectional ◽  
Content Type

PurposeWestern Balkans countries (WBCs) have a great potential for growth and among the main focuses of entrepreneurial activity is small- and medium-sized enterprises (SME) sector. Moreover, SMEs are believed to contribute in the economy by stimulating employment, increasing production, transferring new technologies and so forth. Due to this crucial importance the purpose of this paper is to analyze the barriers that hinder labor productivity (LP) of SMEs in WBCs.Design/methodology/approachThe research method employed to discover solution to this research problem is quantitative analysis by using survey data of World Bank. Research methodology applied in this paper found it correctly to use cross-sectional data and conducts a factor analysis and ordinary least square (OLS) regression as the best procedure for this type of data.FindingsThe results show variability for different countries access to finance, tax rates, tax administration, corruption, inadequately educated labor force, competition in informal sector and political instability appear to be some of the main obstacles that are negatively affecting LP of SMEs in WBC.Research limitations/implicationsAlthough this study is the first to analyze all the possible obstacles for the six WBCs using factor analysis better results could be obtained with larger samples and panel data.Practical implicationsThe policy implications of this study suggest that in order to boost productivity of these firms there must be a reduction of the barriers and improvement of business environment. Although, this study is the first to analyze all the possible obstacles for the six WBCs using factor analysis and contributes as insight to policy makers, better results could be obtained with larger samples using panel data.Originality/valueDifferently from previous studies this work uses explanatory factor analysis and method OLS to estimate regressions for all barriers in each country of Western Balkan region.

scholarly journals Drivers of Ar-Rahnu (pawn) acceptance: Malaysian evidence

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hassanudin Mohd Thas Thaker ◽  
Ahmad Khaliq ◽  
Mohamed Asmy Bin Mohd Thas Thaker ◽  
Anwar Bin Allah Pitchay ◽  
K. Chandra Sakaran
Keyword(s):  
Financial Institutions ◽  
Perceived Risk ◽  
Credit Card ◽  
Social Factor ◽  
Partial Least Square ◽  
The Body ◽  
Least Square ◽  
Islamic Banks ◽  
Content Type ◽  
Islamic Financial Institutions

Purpose The purpose of this paper is to examine the factor persuading the acceptance of Islamic pawn broking (Ar-Rahnu) among Islamic bank customers. Design/methodology/approach The authors collected the data using a self-administered questionnaire design and analysed using SPSS Statistics and smart partial least square. The study is restricted to only respondents who are based in the area of Klang Valley (Selangor and Kuala Lumpur), as these two areas have a larger number of Islamic banks and a decent number of Islamic banks’ clients. A total of 381 respondents’ responses are used for this study, and the constructs involved for analysis purpose are affect, social factor, facilitating conditions, perceived financial benefits and perceived risk constructs. Findings The finding suggests a significant positive association for social factor and perceived risk, while negative association learnt for affect on acceptance of Ar-Rahnu financing. On the same note, the facilitating condition and perceived financial benefit are found insignificantly related. Practical implications The findings generated from this study are expected to enrich the literature on the body of knowledge, as it has served to broaden the understanding of the Ar-Rahnu acceptance level in Malaysia. As mentioned, there is limited literature available using this type of financing. Existing studies focus too much on conventional financing products such as personal financing, credit card, short-term loan and many others. Less attention is given to Ar-Rahnu financing. Thus, this study expected to add value to the literature available in the context of Islamic pawn broking business. Moreover, the findings of this study will be very helpful for the Islamic financial institutions to find the best way to retain Ar-Rahnu clients and encourage more client to choose Ar-Rahnu as a mode of financing. Originality/value This study owns greater potential to assist Islamic financial institutions to discover the best techniques to retain and encourage the grander number of clients for Ar-Rahnu as a mode of financing.

scholarly journals Bridging the Gap? Government Subsidized Lending and Access to Capital

2013 ◽  
Vol 2 (1) ◽  
pp. 98-128 ◽  
Author(s):  
Kristle Romero Cortés ◽  
Josh Lerner
Keyword(s):  
Community Development ◽  
Financial Institutions ◽  
Regression Discontinuity ◽  
Financial Institution ◽  
Credit Unions ◽  
Credit Union ◽  
First Year ◽  
Public Funds ◽  
Union Activity

The consequences of providing public funds to financial institutions remain controversial. We examine the Community Development Financial Institution (CDFI) Fund’s impact on credit union activity, using hitherto little studied U.S. Treasury data. The CDFI Fund grants increase lending at credit unions by 3%. For every dollar awarded, 45 additional cents are loaned out to borrowers in the first year, and up to an additional $1.60 is loaned out within three years. Delinquent loan rates also increase slightly. Our panel results are supported by a broadband regression discontinuity analysis. Politics does not seem to play a role in allocating funding. (JEL G28)

Credit unions’ acquisitions of banks and thrifts

2019 ◽  
Vol 11 (3) ◽  
pp. 306-318
Author(s):  
David A. Walker ◽  
Kathryn I. Smith
Keyword(s):  
Capital Structure ◽  
Design Methodology ◽  
Economies Of Scale ◽  
Financial Analysis ◽  
Credit Unions ◽  
Credit Union ◽  
Social Implications ◽  
Economies Of Scope ◽  
Content Type ◽  
Practical Implications

Purpose In total, 14 credit unions have acquired 16 banks and savings institutions since 2012; 7 additional acquisitions are in progress and are expected to close before year-end 2019. The analysis of the population of these acquisitions spans the paths of annual differences in CAMEL ratios. Most acquirers have a somewhat revised capital structure and are often benefiting from economies of scope, as well as economies of scale. Since their acquisitions, the acquiring credit unions have become less risky, measured by simulated CAMEL ratios, and they are lending a larger share of their deposits. There is no apparent financial reason to discourage credit unions from acquiring additional banks and savings institutions. The National Credit Union Administration does not need to be particularly hesitant to allow credit unions to acquire banks and thrifts. Design/methodology/approach Financial analysis is done via simulated CAMEL ratios. Findings After acquiring banks, credit unions are less risky and lend a greater share of their deposits. Research limitations/implications The study analyzes the population of the credit unions that have acquired banks since 2012, but the population consists of 14 banks acquiring 16 credit unions. Practical implications Credit unions should not be prohibited from further acquisitions of banks and thrifts. Social implications Credit union members are better served after a credit union acquires a bank. Originality/value No previous study has explored the effects of credit unions acquiring banks and thrifts, which began in 2012.

scholarly journals Credit unions, co-operatives, sustainability and accountability in a time of change

2019 ◽  
Vol 46 (2) ◽  
pp. 309-323 ◽  
Author(s):  
Akis Kleanthous ◽  
Robert A. Paton ◽  
Fiona M. Wilson
Keyword(s):  
Financial Crisis ◽  
Credit Unions ◽  
State Intervention ◽  
Credit Union ◽  
Content Type ◽  
Stakeholder Relationships ◽  
Study Approach ◽  
Governance Model ◽  
First Time

Purpose The financial crisis of 2008 resulted in calls for change. Commentators suggested that co-operatives, in particular credit unions, could provide accountability and sustainability through their open governance and mutual status. However, such suggestions assumed that co-operative principles and practice continued to underpin the efficacy of co-operative banking, and that credit unions, one of the most prevalent forms of co-operative banking, could offer a viable financial alternative. Instead, in the case of Cyprus, the financial crisis and the associated aftershocks triggered the nationalisation and demutualisation of credit unions. This prompted the researchers to question both the viability of a co-operative banking future and the extent to which co-operative principles were shaping decision making, governance, accountability and sustainability. The paper aims to discuss these issues. Design/methodology/approach A case study approach was adopted to explore the degree to which co-operative principles still shaped credit union thinking and stakeholder relationships. Findings As is the case elsewhere within the co-operative movement, the findings point the fact that governance is weaken by the low membership participation and that the principles are no longer universally applied. Credit unions, if not co-operative banking, may not offer the financial assurances that commentators have called for. Moreover, the guiding principles may no longer be embedded within the fabric of the movement. Practical implications Findings are important for practitioners/supervisory body as they highlight possible impacts on co-operative’ future and especially on their governance model and level of autonomy and independence in case of state intervention. Originality/value The research undertaken is original as it is the first time credit unions in Cyprus were examined for adherence to co-operative principles.

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