MADISON, Wis. Just as NCUA is reexamining member business lending rules, Filene Research Institute on Wednesday published a new study that found business lending presents an opportunity for credit unions that is "ripe for growth" and could be beneficial to local communities.
The study, titled, "Room to Grow: Credit Union Business Lending," was funded by CUNA Mutual Group and authored by David A. Walker, Ph.D., who is the John A. Largay Professor at the McDonough School of Business, Georgetown University.
Walker focused on 120 credit unions located in 39 states and 96 counties. CUs in the study all were approaching the regulatory cap for business lending.
"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," Walker wrote in the report. "Increasing the percentage of total assets that credit unions may lend to business should be beneficial to local communities."
Filling Gaps
Credit unions that are active business lenders are expanding this asset more rapidly than other assets and, in many counties, filling gaps left by banks, the study found. It said the commercial banking industry is becoming "more concentrated" and focusing more on real estate lending and less on commercial and industrial lending.
Over the past 35 years, the percentage of bank loans to businesses has declined from 35% to 21%, while banks' real estate lending has increased from 28% to 52% of total loans.
Credit unions currently are restrained by statute and regulation from lending more than 12.25% of their assets to MBL unless they qualify for certain exceptions.
"An important policy question is whether credit unions should be limited to 12.25% of their assets in business lending," said George Hofheimer, chief knowledge officer at the Filene Research Institute. "This study shows clearly that many credit unions can fill a business lending gap in their communities."
Even when consumer lending demand is low, credit unions are finding ways to lend to businesses in their communities, the study found. In counties with larger banks and savings institutions, on average, credit unions do more business lending.
"This is important research that we were confident would produce significant results that can potentially benefit the credit union system and small businesses," said Christopher Roe, CUNA Mutual Group senior vice president for corporate and legislative affairs. "That is why we chose to fund the study under the direction of the Filene Research Institute."
The findings indicate a need for small businesses to gain greater access to credit, and credit unions have an opportunity to fill the void being left by commercial banks, which will potentially provide economic benefits, Roe added. "We plan to submit the report to the NCUA with our public comment letter advocating the agency's proposed member business lending rule changes."
More information about the member business lending research study and its findings can be found at
