MADISON, Wis. (8/20/15)--Credit unions can simultaneously spur growth and support their local communities by focusing harder on member business lending, a recent white paper published by Filene Research Institute and funded by CUNA Mutual Group notes.
The report is titled, “Room to Grow: Credit Union Business Lending.” It discusses the opportunity credit unions have to step into credit gaps created by commercial banks that have decreased their lending to small businesses--the health of which is critical to a flourishing economy.
Commercial banks have thinned out commercial lending drastically in recent years, the study found, with the percentage of bank loans to businesses dropping to 21% from 35% since the early 1980s, while real estate lending has risen to 52% from 28% over that stretch.
This is where credit unions can shine.
“The study shows that there is room to grow,” said David. A Walker, professor at Georgetown University’s McDonough School of Business, and the report’s author. “Credit union business lending is primarily to small businesses, and it is well established that small firms are the engines of economic growth for many aspects of the U.S. economy.
“Increasing the percentage of total assets that credit unions may lend to business should be beneficial to local communities.”
The volume of business lending credit unions may be able to offer could change soon as well.
CUNA will host a webinar today at 3 p.m. (ET) that will break down a proposal by the National Credit Union Administration that could ease business lending rules by removing nearly all regulations not specifically required by the Federal Credit Union Act. (See related story: Register for today’s webinar on NCUA MBL proposal.)
The proposal also would allow credit unions to write their own policies and limits on collateral and security requirements. The public can submit comments to the NCUA on the proposal until Aug. 31. CUNA Mutual Group will submit the white paper as part of its comments to the agency.
CUNA Mutual also has made a large grant to Filene to fund a number of studies in the future as well.
“An important policy question is whether credit unions should be limited to 12.25% of their assets in business lending,” said George Hofheimer, Filene Research Institute chief knowledge officer. “This study shows clearly that many credit unions can fill a business lending gap in their communities.”