Effects of financial structure and instruments on income of low income credit unions

Ellene Kebede and Curtis Jolly

Applied Financial Economics, 2001, vol. 11, issue 2, 231-236

Abstract: The effects of loan to asset ratio, investment to asset ratio, management composition and delinquency rate on income to asset ratio of low income credit unions (LICUs) were evaluated. Specific attention was given to risk income behaviours of LICUs. It was found that loan to asset ratio positively influenced the magnitude of income to asset ratio, while the investment to asset ratio had a negative effect on the income to asset ratio. LICUs that employed managers had higher incomes to asset ratios than those with volunteer managers serving in this capacity. The delinquency rate and income to asset ratio were positively related, but negatively related to delinquency rate squared indicating that when the delinquency rate increased at an increasing rate the income to asset ratio fell. LICUs portrayed three risk behavioural patterns, each associated with size or income of the organization: (1) small LICUs had high risk behaviour, (2) middle income LICUs were risk neutral, and (3) large LICUs accepted higher risks as income increased.

Date: 2001
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DOI: 10.1080/096031001750071622

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