Firm Specific, Financial Development and Macroeconomic Determinants of Credit Union Lending

Abstract

Credit unions are set up to providefinancial services, especially loans to members in acooperative setting. The increasing competition from banking and non-bankingfinancial institutionsimplies credit unions must providefinancial products and services with a clear understanding offactors that interact in this competitive industry. This paper evaluates the discretional and non-discretional factors that tend to influence loans credit unions grant their members. Fromfixed effectmodel estimate, discretional factors such as size, profitability, management quality and solvencypositively associate with credit union loan business whiles loan loss, net worth, non-loan incomeand non-loan activities associate negatively. Contractionary monetary policy creates an increase inloan demand in the credit union. Credit union managers should monitor developments taking placein the loanable funds market as increasing overhead cost of banks may imply a possible increasein loan demand leading to diseconomies of scale. Copyright © 2018 John Wiley & Sons, Ltd.