Ensuring credit unions are fit for purpose

Impact Area: Professional service firms and financial markets

Institution: School of Management, University of St Andrews

Leading Academic: Professor John O. S. Wilson



In 2013, there were 56,904 credit unions across 103 countries with more than 207.9 million members and approximately $1693 billion in assets. There is a great diversity within the credit union movement across these countries. This reflects the various economic, historic and cultural contexts within which credit unions operate. Credit unions have survived and grown over many years and in many countries, demonstrating what can be achieved by a volunteer‐led not‐for‐profit movement.

Research on credit unions is relatively scarce which is somewhat surprising given that in many countries they serve those segments of the population that would be otherwise financially excluded, while for others they offer a credible alternative to commercial banks.

Underpinning research

Over the past 15 years, Professor Wilson’s research has sought understand the growth, development, scale, scope, governance and performance of credit unions in different countries. Such work is especially important in the aftermath of the financial crisis in 2008, as many countries sought to strengthen their retail financial sectors. The research has had wide-ranging impact internationally on the ways in which policy makers, regulators and practitioners view the sector.

Specifically, as part of the Irish Commission on Credit Unions, Wilson’s work was taken up in reports which made a raft of recommendations that were later adopted to form the basis for new legislation (Credit Union and Co-operation with Overseas Regulators Act 2012). This new legislation in turn has affected the governance, regulation, stabilisation policy and structure of the credit union sector in Ireland.

Benefits and impacts
Instrumental impact

The non-academic reach of Wilson’s research is demonstrated by commissioned reports for the Scottish and Irish Governments and invited talks at the US Federal Deposit Insurance Corporation in Washington and at Westminster Briefing Events in London (amongst others). The clearest and most significant impact of this research has been its influence on the credit union sector in Ireland where credit unions are central to the financial services sector (with 70% of the adult population members of credit unions). In 2011, following an IMF and EU bailout, the Irish government established the Credit Union Commission to investigate and make recommendations about their future role and operation. Due to his previous research on credit unions, Wilson was one of two academics appointed by the Irish government to the Credit Union Commission. His previous research and expertise were integral to the production of a report (2012) that formed the basis for legislative change. This led to structural change in the industry. The Minister for Finance for the Irish Government asserted that ‘the work of the Commission will inform Government policy on credit unions for the foreseeable future’; and the head of credit union policy at the Central Bank of Ireland noted that ‘the Commission considered and discussed many issues in relation to credit unions and these discussions were informed by John Wilson’s knowledge of, and research on, credit union movements around the world’. Wilson fed the results of his research into the Commission’s deliberations, and many of his findings and insights were subsequently reflected in the Commission’s interim and final reports:

The final report contained over 60 recommendations, which covered corporate governance, prudential regulation, stabilisation policy and sector re-structuring via the establishment of a credit union restructuring board.

The CEO of the Irish League of Credit Unions concluded that ‘Professor Wilson’s interventions went a long way to ensuring that the recommendations, and by extension the legislative provisions based on those recommendations, benefited from his suggestions regarding the workability of various options based on his experience of other jurisdictions.’

The Commission’s recommendations were endorsed by the Irish Ministry of Finance and approved by the troika of the International Monetary Fund, European Central Bank and European Commission. They were used directly to inform legislation in the shape of the Credit Union and Co-operation with Overseas Regulators Act 2012. The Commission’s report and its underpinning research have also received widespread media coverage in Ireland. In short, Wilson’s research informed much of the Commission’s deliberations and recommendations, which were subsequently adopted by the Irish Government and ratified in parliament via the production of new legislation. This new legislation in turn has been instrumental in affecting the corporate governance, prudential regulation, stabilisation policy and structure of the credit union sector in Ireland (much of which is contained in a new Credit Union Handbook published by the Central Bank of Ireland in September 2013). The Credit Union Restructuring Board in Ireland is currently engaged in facilitating the restructuring of the sector.