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Credit union policies and performance in Latin America

  • Westley, Glenn D.
  • Shaffer, Sherrill

This paper explores empirical linkages between credit unions' (CUs') policies and their financial performance, as measured by loan delinquency and profitability, using a unique micro dataset of credit unions in three Latin American countries. The estimated translog profit function is generalized using a slack variable concept that parameterizes any systematic deviation from profit- maximizing behavior exhibited within the sample. In general, we find that performance depends in important ways on two types of CU policy variables, some associated with the incentives of borrowers to repay and others that affect the CU's ability to screen loans.

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Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 23 (1999)
Issue (Month): 9 (September)
Pages: 1303-1329

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Handle: RePEc:eee:jbfina:v:23:y:1999:i:9:p:1303-1329
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  1. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
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  10. Smith, Donald J, 1984. " A Theoretic Framework for the Analysis of Credit Union Decision Making," Journal of Finance, American Finance Association, vol. 39(4), pages 1155-68, September.
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  12. Loretta J. Mester, 1989. "Testing for expense preference behavior: mutual versus stock savings and loans," Working Papers 89-27, Federal Reserve Bank of Philadelphia.
  13. Christopher P. Beshouri & Dennis C. Glennon, 1996. "CRA as "market development" or "tax": an analysis of lending decisions and economic development," Proceedings 523, Federal Reserve Bank of Chicago.
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  16. Ghani, Ejaz, 1992. "How financial markets affect long run growth : a cross country study," Policy Research Working Paper Series 843, The World Bank.
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