Lending procedures and the viability-social objectives conflict in credit unions

Sound lending procedures in retail financial institutions involve identifying high-risk applicants, modifying loan conditions such as security requirements, and monitoring repayments post-loan approval. For managers of credit unions, this procedure is complicated by the need to achieve balance betwe...

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Bibliographic Details
Published in:International journal of bank marketing 2003-12, Vol.21 (6/7), p.304-311
Main Authors: Ralston, Deborah, Wright, April
Format: Article
Language:English
Subjects:
Bank marketing
Banking
Borrowing
Conflict
Consumer credit
Credit risk
Credit unions
Default
Employment
Finance companies
Financial institutions
Financial services
Households
Interest rates
Lending
Loan approval procedures
Loans
Low income groups
Mortgages
Objectives
Personal bankruptcy
Personal finance
Polls & surveys
Social responsibility
Statistical analysis
Studies
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Summary:Sound lending procedures in retail financial institutions involve identifying high-risk applicants, modifying loan conditions such as security requirements, and monitoring repayments post-loan approval. For managers of credit unions, this procedure is complicated by the need to achieve balance between the institution's social objective of improving loan accessibility so members can attain lifestyle goals and the possibility of reducing the institution's viability through loan default. The results of our survey of Australian credit unions, in which 70 per cent of respondents reported experiencing some bankruptcy-related default on personal loans, indicate managers do not impose more stringent lending conditions on high-risk borrowers. However, social and viability objectives could be better balanced through careful loan monitoring and timely arrears practices.
ISSN:0265-2323
1758-5937
DOI:10.1108/02652320310498456