McKillop D.G. and Quinn B (2010) ‘A Performance Overview of Irish Credit Unions’

McKillop D.G. and Quinn B (2010) ‘A Performance Overview of Irish Credit Unions’ published in spring edition of CU Focus, a quarterly publication produced by the Irish League of Credit Unions.

Introduction

Credit unions are structured around a well defined membership; they are not subject to shareholders’ profit expectations; and by legislation cannot provide high risk structured financial products. For these reasons credit unions can be expected to be insulated from the worst excesses of the current turmoil in financial markets. There are however clouds on the horizon. Bad debts[1] and loan arrears are on the rise due in part to the general economic downturn but also due to poor investment decisions made by some credit unions. These poor investments decisions have been exacerbated due to the inexorable rise in the share of investments in many credit union portfolios.  The average loan to asset ratio for Irish credit unions has declined from 56.97% in 2002 to 47.16% (2005) to 47.38% (2007) and there has been a commensurate increase in investments as a percentage of assets from 37.65% in 2002 to 48.12% in 2005 and to 48.25% in 2007…



[1] In 2002 bad debt write-off as a percentage of gross loans was approximately 0.38%, rising to 0.56% in 2005 and to 0.60% in 2007. While this percentage level of bad debt is low compared to other retail financial institutions it is an accumulating problem.

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