Cost Efficiency, Environmental Influences and UK Credit Unions, 1991 to 2001

This study uses a stochastic frontier analysis to evaluate the relative performance of UK credit unions over the period 1991 to 2001. The analysis found that UK credit unions are subject to high levels of (gross) in efficiency. The analysis also revealed that the environment within which individual credit unions operate plays a critical role in the relative efficiency of credit unions. In terms of direction of influence, the analysis of environmental effects highlighted (main in sights) that larger credit unions are more cost efficient as are credit unions which do not draw their membership exclusively from areas of high deprivation. These directional influences were viewed as offering some encouragement to the thrust of the Financial Services Authority’s new policy regime for credit unions which may well result in a smaller number of larger credit unions each with a more varied membership mix.