Credit Union Policies and Performance in Latin America
نویسندگان
چکیده
This paper presents a conceptual framework for explaining credit union (CU) loan delinquency and profitability in developing countries, together with empirical estimation for a unique sample of Latin American CUs. Delinquency and profitability were found to be responsive to the incentives that CUs create for their borrowers to repay loans. These incentives include loan and deposit rates, the use of loan collateral, the extent to which the CU maintains a serious culture of loan repayment, and in the case of delinquency the financial health of the CU. Certain other CU policy variables that operate only partially through borrower incentives were also found to have important effects on delinquency and profitability, including especially the credit union wage rate. Profitability was examined using a translog profit function, extended to reflect two types of inefficiency. One type of departure from profit maximization involved the CU's decision to alter prices (loan or deposit rates) to favor borrowers or depositors. More general departures from efficiency were modeled using a slack variable concept capable of parameterizing inefficient combinations of any inputs and outputs. Within both frameworks, CU price and delinquency control policies were found to be important determinants of profitability. So important was delinquency control to maintaining profitability that higher wage rates and often higher deposit rates were found to increase profitability in part because of their beneficial impact on loan repayment, despite the fact that raising these rates directly increases costs.
منابع مشابه
CRED Research Department WORKING PAPER NO . 98 - 1 IT UNION POLICIES AND PERFORMANCE IN LATIN AMERICA
This paper explores empirical linkages between credit unions’ (CUs’) policies and their financial perfomance, as measured by loan delinquency and profitability, using a unique micro dataset of credit unions in three Latin American countries. The estimated translog profit function is generalized using a slack variable concept that parameterizes any systematic deviation from profitmaximizing beha...
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