A Sustainable Business Model Strategy for Irish Credit Unions: Does One Size Fit All?

24 Pages Posted: 2 Oct 2015 Last revised: 4 Dec 2015

See all articles by Donal G. McKillop

Donal G. McKillop

Queen's University Management School

Barry Quinn

Queens University Management School

Date Written: September 30, 2015

Abstract

This study examines the business model complexity of Irish credit unions using a latent class approach to measure structural performance over the period 2002 to 2013. The latent class approach allows the endogenous identification of a multi-tiered business model based on credit union specific characteristics. The analysis finds a three tier business model to be appropriate with the multi-tier model dependent on three financial viability characteristics. This finding is consistent with the deliberations of the Irish Commission on Credit Unions (2012) which identified complexity and diversity in the business models of Irish credit unions and recommended that such complexity and diversity could not be accommodated within a one size fits all framework. The analysis also highlights all tiers are subject to decreasing returns to scale at the sample mean. This may suggest that credit unions would benefit from a reduction in scale or perhaps that there is an imbalance in the present change process. Finally, relative performance differences are identified for each tier in terms of technical efficiency. This suggests that there is an opportunity for credit unions to improve their performance by using within tier best practice or alternatively by switching to another tier.

Keywords: credit unions, business model, latent class frontier

Suggested Citation

McKillop, Donal G. and Quinn, Barry, A Sustainable Business Model Strategy for Irish Credit Unions: Does One Size Fit All? (September 30, 2015). Available at SSRN: https://ssrn.com/abstract=2667505 or http://dx.doi.org/10.2139/ssrn.2667505

Donal G. McKillop

Queen's University Management School ( email )

25 University Square
Belfast, Northern Ireland BT7 1NN
Northern Ireland

Barry Quinn (Contact Author)

Queens University Management School ( email )

25 University Sq
Belfast, BT7 1NN
Ireland

HOME PAGE: http://www.barryquinn.com

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