An Investigation into the Link between UK Credit Union Characterisitics, Location and their Success

The unique characteristics of credit unions reduces the information asymmetry that is prevalent in credit making decisions, enabling them to provide loans where other financial institutions cannot. This makes them a potential tool in the fight against financial exclusion. Yet, the UK credit union movement is not regarded as being successful, even though there is evidence of much financial exclusion. This study is cross sectional in form, and evaluates characteristics that may contribute to the success of the UK credit union movement at national and regional level, in 2000. The findings are used to consider the impact of recent regulatory changes on the movement. The key findings are that there is a significant relationship between the success of a credit union, its size and the deprivation of the ward from which it sources its members. More specifically, larger credit unions and those located in more affluent wards, are more successful. Affiliation to the Irish League of Credit Unions and having a common bond of occupation, are also found to be contributing factors to credit union success. These results are taken as providing support for the recent changes implemented by the Financial Services Authority (FSA), which is likely to result in the emergence of larger credit unions (through mergers), run by appropriately qualified persons, serving a more mixed-income membership base. It is, however, noted that the history of the UK movement is one of missed opportunities and only time will tell whether credit unions have the wherewithal to accept current opportunities.