SME Lending: a new role for credit unions?

Steve Talbot, Geoffrey Whittam, Ciaran Mac an Bhaird

    Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)

    Abstract

    INTRODUCTION
    Credit unions have a relatively long history, although the first modern day credit union was established in the United Kingdom (UK) in the mid-1960s (Birchall, 2013). The original purpose of credit unions was to provide banking facilities for the financially excluded and hence many credit unions can be found in economically disadvantaged areas of the UK (e.g. Northern Ireland (French and McKillop, 2014)). Founded on the principle of mutualism, membership is limited by the requirements of a ‘common bond’, meaning that members either have to live within a certain geographic area or have other common association such as an occupation or a religious grouping. The idea is that a bond would ‘strengthen the security of the union with members connected by more than financial ties’ (Wright, 2013, p. 5). While the original rules of governance for credit unions specifically debarred credit unions from lending to corporations, recent changes in legislation facilitates lifting this restriction. In theory, this is a plausible policy initiative, as increased centralization of decision-making by financial institutions has exacerbated information asymmetries between small and medium-sized enterprises (SMEs) and lenders.
    Original languageEnglish
    Title of host publicationResearch Handbook on Entrepreneurial Finance
    EditorsJaved G. Hussain, Jonathan M. Scott
    Place of PublicationCheltenham
    PublisherEdward Elgar Publishing
    Pages11-26
    Number of pages16
    ISBN (Electronic)9781783478798
    ISBN (Print)9781783478781
    DOIs
    Publication statusPublished - 18 Dec 2015

    Fingerprint

    Lending
    Small and medium-sized enterprises
    Credit unions
    Financial institutions
    Legislation
    Information asymmetry
    Decision making
    Northern Ireland
    Banking
    Grouping
    Governance
    Centralization

    Keywords

    • credit unions
    • asymmetric information
    • community development
    • finance of SMEs

    Cite this

    Talbot, S., Whittam, G., & Mac an Bhaird, C. (2015). SME Lending: a new role for credit unions? In J. G. Hussain, & J. M. Scott (Eds.), Research Handbook on Entrepreneurial Finance (pp. 11-26). Cheltenham: Edward Elgar Publishing . https://doi.org/10.4337/9781783478798.00008
    Talbot, Steve ; Whittam, Geoffrey ; Mac an Bhaird, Ciaran. / SME Lending: a new role for credit unions?. Research Handbook on Entrepreneurial Finance. editor / Javed G. Hussain ; Jonathan M. Scott. Cheltenham : Edward Elgar Publishing , 2015. pp. 11-26
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    Talbot, S, Whittam, G & Mac an Bhaird, C 2015, SME Lending: a new role for credit unions? in JG Hussain & JM Scott (eds), Research Handbook on Entrepreneurial Finance. Edward Elgar Publishing , Cheltenham, pp. 11-26. https://doi.org/10.4337/9781783478798.00008

    SME Lending: a new role for credit unions? / Talbot, Steve; Whittam, Geoffrey; Mac an Bhaird, Ciaran.

    Research Handbook on Entrepreneurial Finance. ed. / Javed G. Hussain; Jonathan M. Scott. Cheltenham : Edward Elgar Publishing , 2015. p. 11-26.

    Research output: Chapter in Book/Report/Conference proceedingChapter (peer-reviewed)

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    N2 - INTRODUCTIONCredit unions have a relatively long history, although the first modern day credit union was established in the United Kingdom (UK) in the mid-1960s (Birchall, 2013). The original purpose of credit unions was to provide banking facilities for the financially excluded and hence many credit unions can be found in economically disadvantaged areas of the UK (e.g. Northern Ireland (French and McKillop, 2014)). Founded on the principle of mutualism, membership is limited by the requirements of a ‘common bond’, meaning that members either have to live within a certain geographic area or have other common association such as an occupation or a religious grouping. The idea is that a bond would ‘strengthen the security of the union with members connected by more than financial ties’ (Wright, 2013, p. 5). While the original rules of governance for credit unions specifically debarred credit unions from lending to corporations, recent changes in legislation facilitates lifting this restriction. In theory, this is a plausible policy initiative, as increased centralization of decision-making by financial institutions has exacerbated information asymmetries between small and medium-sized enterprises (SMEs) and lenders.

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    Talbot S, Whittam G, Mac an Bhaird C. SME Lending: a new role for credit unions? In Hussain JG, Scott JM, editors, Research Handbook on Entrepreneurial Finance. Cheltenham: Edward Elgar Publishing . 2015. p. 11-26 https://doi.org/10.4337/9781783478798.00008