An Assessment of the credit management process of credit unions : an examination of three chapters

Irish credit unions are facing their most taxing period to date owing to the profusion of loan defaults on their loan portfolios which inevitably has curbed their business performance. Recently the Financial Regulator and other government bodies realise that credit unions must update and implement more stringent processes; thus they have proposed new regulatory policies to facilitate same. With analysts suggesting that 20 out of 414 credit unions are “facing serious solvency issues” (McManus, 2010), a call for an enquiry into credit unions‟ credit management processes are essential. Accordingly this research investigates the credit management processes that are employed by Irish credit unions to sustain their business performance. The purpose of this study is to examine what tools, interventions and standards are exercised in Irish credit unions. Moreover the skill set and level of credit management personnel is assessed as well as the gaps in the current processes. The overall principle of this research is to observe if these processes are sufficient enough to sustain their business performance or do they need to be updated. A triangulation approach was utilised in achieving the research objectives. Firstly a survey was disseminated to three credit union Chapters in Ireland in order to obtain an insight into their daily credit management process. To complement this survey, interviews were conducted on four credit union administrators. This research specifically focuses on these three Chapters alone where all the findings originate from these sources. Numerous findings emerge from this research. The key results underline that credit unions appear to be deficient in the credit control department; namely in the areas of experience, personnel levels and the consistency of interventions used. Moreover, the lack of technology operated in the loan decision process is apparent. Therefore more complex and sophisticated models is a prerequisite if credit unions are to maintain financially stable. In spite of this a number of arduous challenges will face credit unions to implement these changes as their ethos and social duty must be considered. Irish credit unions play a significant role in the Irish financial sector and society however there is limited research pertaining to their credit management processes. This study therefore hopes to provide an insight into this topic and help promote further research into same. In general, this research has a practical value to it as it will disseminate the findings to the survey participants. Subsequently, these credit unions can incorporate the recommendations from this study into their credit management processes in order to sustain their business performance.