Paper
Development Best Practices in Credit Union Supervision: Problem Resolution by Credit Union Management
A guide to operational problem resolution in credit unions
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10 pages
This paper discusses the most common and potentially serious five operational problems in credit unions. It suggests the:
- Key questions to identify causes of each problem;
- Practical steps for problem resolution.
High or uncontrolled loan delinquency - The suggested solutions:
- Accurate identification and disclosure of delinquency;
- Design of report formats that capture key information for decision making;
- Adopt measures such as rescheduling or rewriting of loans;
- Revision of credit policies, loan review and collection practices.
Inadequate or falling net income - The suggested solutions:
- Revise loan and savings interest rates and dividends;
- Monthly comparison of credit union loan rates with competitor rates;
- Periodic review of operating expenses;
- Cash flow analysis for effective cash utilization.
Accounting records being out of balance and/or seriously in errors - The suggested solutions:
- Monthly accuracy review of accounts;
- Support general ledger account balances by subsidiary ledgers;
- Timely accounts closure and financial statement finalization.
Excessive dependency on external credit - The suggested solutions:
- Focus on mobilizing member savings;
- Design client-oriented products with fair rates of return;
- Ensure institutional capital to absorb losses and protect member savings;
- Proper liquidity management.
Use of share multiple lending - The suggested solutions:
- Revision of credit policies and procedures;
- Design credit granting systems with multiple tiers of loan approval;
- Build credit history of clients with the union.
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