Benefit imbalances among credit union member groups: evidence of borrower-dominated, saver-dominated and neutral behaviour?

Brazilian credit union member groups: borrower-dominated, saver-dominated or neutral behavior?

“…For instance, non-monetary benefits are the provision of financial advice, and the convenience of directly deducting savings applications and loan payments out of a member's payroll. However, Walker and Chandler (1977), Smith et al (1981), Smith (1984), Patin and McNiel (1991a), and Leggett and Stewart (1999) agree that non-monetary benefits are uniformly distributed across members of CUs and, therefore, will have no effect on the potential asymmetry by which benefits are distributed among their members group. Based on this, we ignore non-monetary benefits and focus only on how monetary benefits are distributed across CUs members.…”

“…Using this index distribution, they found that 80% of CUs they had previously classified showed evidence of neutral behavior. Patin and McNiel (1991b) employed this same approach to analyze CUs in USA and found, like Patin and McNiel (1991a), that most CUs exhibited neutral behavior.…”

“…Based on the theoretical works of Walker and Chandler (1977), Smith et al (1981) and Smith (1984), Patin and McNiel (1991a) developed a direct measure of the net monetary benefits to saver and borrower members, and applied it to calculate the differences between the net monetary benefits allocated to savers (NMBS) and borrowers (NMBB) in the years 1984 and 1985 for each of 10,565 (10,142) federally chartered and 4,657 (4,932) state chartered/federally insured CUs in the United Sates. They tested if the CU industry in USA balanced the interest of borrowers and savers by observing if the mean of the differences between NMBS and NMBB for all CUs in their sample would differ from zero when using the t test.…”

“…In other words, NCUA started to allow multiple group credit unions to operate. Since the National Association of Federal Credit Unions (NAFCU) claims that non-core members are more likely to be borrowers in a CU than the core members, Leggett and Stewart (1999) used a more restrictive version of the approach proposed by Patin and McNiel (1991a) to identify the orientation of 2,025 federally chartered CUs in 1997 from the twenty-five largest Metropolitan Statistical Areas in USA. They found that on average CUs were saver-oriented regardless of the type of their membership but common bond CUs had a stronger saver orientation than multiple bond CUs.…”

“…A borrower-(saver-) dominated CU benefits borrower (saver) members at the expenses of saver (borrower) members, and a neutral CU equally benefits its member groups. This paper applies direct measure of monetary benefits to each member group (Patin & McNiel, 1991a) to test for the existence of dominated behavior in Brazilian CUs, and is the first to apply panel data regressions to identify the determinants of CUs behavior. We use a unique panel data with 40,664 observations taken from 533 CUs affiliated with the largest Brazilian cooperative network.…”