The applicability of a credit union within the Maltese co-operative sector : an analysis

Abstract

Purpose: The main objective of this dissertation was to analyse the applicability of a credit union in Malta. This includes asserting the credit union concept, role and function, assessing the contribution that a credit union can provide to the financing needs of Maltese co-operatives, establishing the institutional and regulatory changes that may be necessitated by the introduction of a credit union and asserting the nature of a credit union. Design: The objective of this study was achieved by requesting all co-operatives to participate in a questionnaire, out of which thirty nine valid responses were collected, supported by eleven interviews carried out with experts from the co-operative authorities, from the regulator, from a commercial bank, an auditor, two lawyers, an economist and a social scientist. Findings: The findings of the study indicated that the establishment of a credit union can be valuable to Maltese co-operatives and the co-operative movement. Cooperatives long to have a co-operative financial institution, agree that a credit union would be able to promote co-operatives and would be willing to become members of the credit union, use its services, invest, attend Annual General Meetings and participate in membership activities. However, this study also proves that currently the local co-operative movement might lack the ability to establish a credit union for several reasons. This study also shows that institutional and regulatory changes would have to be necessary for the establishment of a CU. Conclusions: This study concludes that the financial inclusion role that CUs play within a European Union context is also applicable in Malta. Furthermore, the banking legislation in Malta should be amended in line with the European Union Directive on Capital requirements. This study also concludes that the CU’s lending practices can assist the credit union in improving the Maltese co-operative movement. Moreover, this study concludes that although a credit union is applicable in Malta as it can positively contribute to the financing needs of Maltese co-operatives, the challenges hindering the set-up of a credit union are currently too large. Value: This study hopes to provide insight on how to further diversify the co-operative movement in Malta by the establishment of a credit union.