The aim of this study is to develop a strategic program for St. Mary ‘s Navan Credit Union. A strategic program is defined as “ an administrations procedure of specifying its scheme, or way, and doing determinations on apportioning its resources to prosecute this scheme, including its capital and people ” . ( Wikipedia, 2010 )
2. Introduction to Credit Unions
Harmonizing to the Credit Union Constitution Act ( 1997 ) , the intent of a Credit Union ( CU ) is to:
Promote thrift among its members ;
Make a beginning of recognition for provident and productive intents ; and
To utilize and command members nest eggs for their common benefit.
The International Credit Union motion began in the twentieth century when several co-operative developments emerged to include the Raiffeisen motion in Germany. These administrations were founded to help people help themselves out of debt and poorness. The CU motion was established in Ireland in 1958 when Nora Herlihy co-founded the first CU in Dublin City. At the clip many people were denied entree to personal finance at a sensible cost, and the lone entree to finance was through expensive hire purchase or money loaners.
CUs typically have the undermentioned features:
CUs have a distinguishable and of import function in communities and the overall fiscal services industry. The Credit Union Act of 1977 sets out the maps of the Registrar of Credit Unions as being “ to modulate recognition brotherhoods with a position to the protection by each recognition brotherhood of the financess of its members ; and the care of the fiscal stableness and good being of recognition brotherhoods ” . As a tie in to the “ community side ” of Credit Unions, in the yesteryear they were frequently referred to as “ the hapless adult male ‘s bank ” .
CUs operate under a set of regulations that set out the operating rules of the CU. If a CU wants to amend its regulations it has to register the amendment with the Registry of Credit Unions after the amendment is passed at an AGM/SGM. The alterations include points such as a alteration to the common bond or supplying extra services to its members. Changes to the regulations must be in conformity with the commissariats of the Credit Union Act 1997. CUs are capable to assorted statute laws, including:
Credit Union Act 1997
Markets in Fiscal Instruments and Miscellaneous Provisions Act 2007 ( subdivision 17 )
Criminal Just Act 1994
Investing Mediators Act 1995 ( for certain activities )
Assorted Statutory Instruments are besides applicable to CUs.
( ILCU, 2010 )
3. Introduction to Navan Credit Union
Navan CU opened to the populace on 20th March 1963 with nest eggs of ?30. Harmonizing to one establishing member Michael Woods ( MCH, 2008 ) : “ The troubles encountered by ordinary nice working people in seeking to acquire recognition triggered in my head that something needed to be done about it. Before the CU arrived no recognition was available to ordinary people despite a individual ‘s good character and standing. ”
Mission Statements place “ what we want to go ” ( Gray and Larson, 2010 ) . The mission statement for Navan CU ( 2010 ) is provided in Table 1 below:
Table 1 – Navan Credit Union Mission Statement
The significant and continued growing of Navan CU between 1962 and 2008 is shown in Figure 1. Information on Navan CU, including cardinal mileposts and day of the months, is provided in Appendix A.
Figure 1 – Navan CU Membership Growth 1962 – 2008 ( Navan, 2010 )
4. Strategic Plan for Navan Credit Union
The typical phases involved in strategic planning are shown in Figure 2. For the intent of this study, all phases will be used to develop the strategic program for Navan CU.
Phase 9: Implement the strategic program.
Phase 8: Supply fiscal projections.
Write the strategic program.
Determine cardinal findings and schemes.
Phase 5: Analyse internal and external factors impacting recognition brotherhood.
Phase 4: Use quantitative & A ; qualitative techniques to measure concern.
Identify what countries the program should cover.
Phase 2: Organise kick off meeting.
Appoint analyst & A ; commission.
Phases involved in strategic
Figure 2 – Phases Involved in Strategic Planning ( ILCU, 2007 )
Phase 1 – Appoint Analyst and Committee
This phase involves the assignment of the analyst and commission by the Board of Directors. Harmonizing to the Irish League of Credit Unions ( ILCU, 2010 ) , such commission should dwell of 5-7 people that will work with the analyst while describing developments to the Board at regular intervals.
The intent of the analyst is to explicate and so implement the strategic program. The analyst may be an internal or external resource, the latter holding the benefit that they bring a different position and experience that may non be available internally, while an internal analyst would be familiar with the set up and besides be economical.
Phase 2 – Organise a Meeting
The intent of this phase is to discourse and hold on a vision for the CU.
For the intent of this study, the Mission Statement ( Table 1 ) for Navan CU will be used as the “ vision ” , i.e. how it will supply a comprehensive scope of fiscal services with self-respect and efficiency.
Phase 3 – Identify What Areas the Plan Should Cover
The intent of this phase is to analyze the cardinal facets of the CU including people, substructure administration and fundss to find the chief elements to be addressed in the strategic program. A utile starting point for this phase is a stakeholder analysis.
Stakeholders are defined as “ people and administrations that are actively involved in the undertaking, or whose involvements may be positively or negatively affected by the undertaking ” . ( Gray and Larson, 2010: 341 ) . Examples of Navan CU Stakeholders are provided in Table 2.
Table 2 – Navan CU Stakeholders
For the intent of this study, the countries to be covered by the strategic program, along with a brief description, are as follows:
Loan Book, Investments and Depositors Savings – these are the chief beginnings of income for all CUs.
Membership – members are a cardinal stakeholder in Navan CU and they require fiscal services from the CU.
Costs/Expenses – Copper are non-profit doing administrations. Hence, all excess income generated is returned to the members. Either dividend is distributed or the moneys are invested into betterment of CU services. Naturally, the lower the costs or disbursals, the higher excess income
Phase 4 – Use Quantitative and Qualitative Techniques to Assess Business
The intent of this phase is to reexamine the CUs current market place to guarantee there is a solid foundation from which it can explicate a strategic program. This analysis should be based on both quantitative ( i.e. numerical ) and qualitative information.
Quantitative analysis is defined as “ the aggregation and analysis of quantitative informations to place statistical dealingss of variables ” . ( IAR, 2010 ) . An illustration of quantitative informations applicable to the CU is fiscal informations.
Qualitative analysis is defined as “ nonnumeric information such as conversation, text, sound, or picture ” . ( IAR, 2010 ) Examples of qualitative informations applicable to the CU are studies and members positions.
Phase 5 – Analyse Internal and External Factors Affecting CUs
The intent of Stage 5 is to set about a elaborate analysis at micro and macro degrees that covers all relevant facets of the CU, both internally and externally ( Figure 3 ) . A utile analysis tool is a SWOT ( Strengths, Weaknesses, Opportunities and Threats ) Analysis.
A sum-up of the SWOT analysis completed on Navan CU is provided in Table 3 – the cardinal points of the analysis are identified in bold, and extra information is provided in Appendix B.
Figure 3 – Analysis of Internal and External Factors
a-?A A A A A A A Competitive involvement rates for loans every bit good as savings/dividend
a-?A A A A A A A Bad Debt – Control and Recovery
a-?A A A A A A A Government warrant strategy a‚¬100,000
a-?A A A A A A A Regulatory alterations
a-?A A A A A A A No more than one CU within the same vicinity ( unlike the Bankss )
a-?A A A A A A A Operating costs/expenses
a-?A A A A A A A Flexible/lump amount refunds on loans
a-?A A A A A A A Less frequent history users ; Limited Services
a-?A A A A A A A CU = trade name you can swear
a-?A A A A A A A Potential tally on money if the board was suspended or no dividend paid etc.
a-?A A A A A A A Business Model ; Focus
a-?A A A A A A A Possible run on money due to increasing consumer outgo ( unemployed members utilizing nest eggs for twenty-four hours to twenty-four hours disbursals )
a-?A A A A A A A Education/Training – Staff and Public
a-?A A A A A A A High Cost of Fundss
a-?A A A A A A A Sudden unexpected decease of member – loan written off and nest eggs doubled
a-?A A A A A A A Liquidity
a-?A A A A A A A Access to Money ( e.g. gap hours )
a-?A A A A A A A Business Model – limited flexibleness
a-?A A A A A A A Consolidate Current Business: New/Improved patterns – e.g. bad debt/loan rate policy – higher rate for hazardous loans, lower rate for less hazardous loans
a-?A A A A A A A ( Forced ) Amalgamations
a-?A A A A A A A Consolidate: Emphasise ethical USP ( Unique Selling Proposition )
a-?A A A A A A A Regulation
a-?A A A A A A A Consolidate: Remind infrequent users of benefits of utilizing CU
a-?A A A A A A A Volunteers: Availability and Competency
a-?A A A A A A A Consolidate: Cross merchandising chances for Insurance merchandises etc.
a-?A A A A A A A Directors ( exec/non-exec, wage,
rating, old ages of service )
a-?A A A A A A A Consolidate: Increased fiscal consciousness of members creates scope for ownership of extra merchandises
a-?A A A A A A A Risk Management and Enforcement ; Prevention of Fraud
a-?A A A A A A A Diversification of merchandises and services: new merchandise development
a-?A A A A A A A Competition – e.g. Banks aiming CU clients
a-?A A A A A A A New distribution channels: e.g. big company schemes ; Tara Mines – refunds and nest eggs deducted from the employees ‘ rewards
a-?A A A A A A A IT/Technology ( e.g. CU-wide web system non-existent )
a-?A A A A A A A New Markets: Promote CU entree to all eligible individuals – possible members from all walks of life ( e.g. Navan Town – 20 % non subjects )
a-?A A A A A A A Political and Economic Forces
Table 3 – Swot Analysis
Phase 6 – Determine Key Findings and Schemes
Following on from Stage 5, the intent of Stage 6 is to analyze the findings and to do determinations with the benefit of solid information. These findings should be prioritised in order of their importance and so addressed by ways of schemes.
With mention to Postpone 3 above, the cardinal findings in order of precedence from the SWOT analysis are:
The proviso for bad debts has increased from a‚¬2.4m in 2008 ( which was 2.8 % of loans ) to a‚¬6.7m in 2010 ( which is 9 % of loans ) and the fright is that this figure is still non plenty. While the CU has non had to direct bad loans to NAMA, their members are sing fiscal troubles due to occupation losingss and pay cuts which are holding a knock-on consequence to the rise in dubious debt.
Adopt a new loan rate policy. Higher rate for hazardous loans, lower rate for less hazardous loans.
Presently the CU Credit Committee applies the five C ‘s of Credit when covering with loans – these are:
Fictional character of Borrower
Capacity to Refund
Capital Accumulation ( nest eggs )
Fortunes ( economic fortunes that may impact the loan )
Navan CU joined the ICB ( Irish Credit Bureau ) in August 2009 ; to obtain recognition histories on members using for loans. Navan CU should utilize this information, in concurrence with the 5 C ‘s, to follow a policy to do the remarkable 7.5 % rate disused and follow a rate which factors in the hazard based on members ICB recognition study.
CU members do non have involvement, alternatively they receive a dividend. To have a nil return on sedimentations ( i.e. no dividend ) , could be seen as a major deterrence to go on to salvage with the CU. Therefore, it is of import a dividend is paid yearly as this could assist halt any “ flight ” of member nest eggs to other fiscal establishments and as a resutl aid to maintain bing nest eggs and besides pull new members.
Promote CU entree to all eligible individuals ( possible members from all walks of life )
Based on our research, the population of Navan town is 30,500 and about 5,000 in the backwoods. With 30,335 members in Navan CU, this suggests that 85 % of those in the catchment country are already members of the CU. Therefore, Navan CU might look at prosecuting possible clients that are presently non being focused on by other fiscal establishments i.e. traveler community, refugees and the unemployed etc.
Significant restructuring programme for CU sector may be required, which has already been referred to in addresss given by the Registrar of Credit Unions. There are no powers at minute to coerce CU ‘s to unify nevertheless the Registrar of Credit Unions has suggested that it may take preemptive actions on neglecting CUs in order to prolong the sector. With a sum of 414 CUs in Ireland, it is suggested that there is an glut of one hundred CU ‘s in province. Compared with US where amalgamations of CUs are really common, if the same rate of amalgamation applied here, we would hold one 3rd fewer CU ‘s i.e. 276 CUs. ( Weston, 2010 )
Phase 7 – Write the Strategic Plan
The strategic program is written at this phase. The recommendations for Navan CUs Strategic Plan are provided in the Section 5 of this documenet entitled “ Disussion and Strategic Plan Recommendations ” .
Strategic plans typically consist of the followers:
Introduction saying the people involved and the principle behind the program ;
An lineation of the construction of the strategic program ;
Executive sum-up ;
Statements on the vision, mission and cardinal schemes of the CU ; and
A reappraisal of the CUs current concern environment
Phase 8 – Provide Financial Projections
The intent of this phase is to fix fiscal projections to back up the Strategic Plan. This typically consists of:
Income & A ; Expenditure histories and Balance sheets for the clip border the program is to cover.
Fiscal projections to be reported on monthly to the relevant interest holders.
The CU supports its program with three sets of fiscal projections: best instance scenario, worst instance scenario and the most likely scenario.
Phase 9 – Implement the Strategic Plan
The intent of this phase is to implement the strategic program. Each strategic end outlined in the program must be prioritised by the board and resources allocated to accomplish the ends.
Phase 10 – Proctor the Consequences
During this phase, consequences are monitored, typically based on the followers:
A formal reappraisal of existent advancement on the program against planned advancement at regular intervals.
If and why the program has slipped from its marks every bit good as recommended actions to rectify the issues.
5. Discussion and Strategic Plan Recommendations
5.1 Bad Debt Management
Figures from Navan CU Annual Reports for old ages 2008, 2009 and 2010:
Provision for bad debts:
2008: a‚¬2,400,000 = 2.8 % of loans
2009: a‚¬4,000,000 = 5 % of loans
2010: a‚¬6,700,000 = 9 % of loans.
Bad Debts written off:
( An addition of 492 % from 2008 to 2010 )
As it stands:
As can be seen from above figures, bad debts are a major issue facing Navan CU in the station Celtic Tiger epoch. The board of managers raised the bad debts proviso to 5 % at the terminal of 2009, as they were “ acutely cognizant ” of the fiscal troubles some members were meeting.
However, the fiscal regulator stated in October 2010 that CUs are “ consistently under purveying against loan losingss ” . ( O’Brien, 2010 ) To do a comparing with a similar sized recognition brotherhood – Newbridge Credit Union ( besides 30,000 members with same common bond, i.e. big provincial town ) had 9.6 % bad debts proviso at terminal of 2009. Navan CU have merely late announced in their one-year study that their bad debt proviso has been increased to 9 % Even still, these figures are likely the tip of the iceberg in world, given that CUs are last on the list of debts people normally pay. 5/10 % seems a long manner off world, looking at some of the write downs on secured loans at the banking establishments. Although it is hard to do estimations, we assume write downs more in to the melody of between 30-50 % could be realistic. Particularly sing the economic challenges that commuter towns like Navan face with people in negative equity.
In an attempt to undertake bad loans, the Registrar of Credit Unions has brought into new statute law on Rescheduled Loans, effectual Oct 1st 2010. ( Fiscal Regulator, 2010 ) CUs must now hold commissariats set aside for non acting loans, on the undermentioned graduated table:
0 -26 hebdomads ; 20 % of staying loan value, A
27 -39 hebdomads: 40 %
40 -52 hebdomads: 60 %
53 hebdomads or over: 100 %
The consequence this will hold on Navan CUs bad debt proviso, ( based on the current national tendency that bad debts are lifting ) , is that more and more capital is traveling to be tied up in this manner.
Coupled with the Regulator demand of 2009 ( Financial Regulator, 2009 ) that if a CU has less than 10 % militias at Year End, A it can non pay a dividend, this could hold some serious deductions for Navan CU. This is a quandary that most CUs nationwide are besides confronting, and the ICLU have advised that 2010 could be a non dividend publishing twelvemonth for recognition brotherhoods because of the consequence bad debts is holding on purveying. ( ILCU, 2010 )
5.2 Adopt a new loan rate policy. Higher rate for hazardous loans, lower rate for less hazardous loans.
As set out above, Navan joined the ICB in August 2009. It appears they presently merely offer a individual loan involvement rate across the board of 7.5 % .
The Financial regulator advised in 2007 that “ proper history of the degree of hazard involved ” should be reflected in the involvement. ( Fiscal Regulator, 2007 ) The ICB studies Navan CU receive will place riskier loan propositions. Navan recognition brotherhood should utilize this information to the full ( they are paying for it, after all ) , to follow a policy get downing in 2011 to make off with the remarkable 7.5 % rate, and present rates that factor in the hazard based on the loan applier ‘s ICB recognition study. If such a step was implemented, so necessity for such high bad loans commissariats would be reduced. It would besides hold the benefit of cut downing the involvement rate to members with good recognition evaluations ( as 7.5 % is presently across the board and applied to everyone ) and do it more competitory in that regard.
There is the distinguishable possibility that 2010 is a twelvemonth where Navan CU could stop up non being in a place to publish a dividend. Historically, it has been publishing dividends of 2.5 % in 2009. If no dividend is declared for 2010, this could do alarm amongst members. So it is imperative that the board of managers should take to counterbalance for that in future old ages, by manner of a particular dividend one time economic system growing stabilises.
In the event that no dividend is paid this twelvemonth, it is critical for Navan CU, to pass on to members at present that they intend to supply for a particular dividend down the line to do up for 2010, in order to keep members assurance in the establishment. This should, in theory, alleviate any “ flight ” of member nest eggs to other fiscal establishments in 2011.
5.4 Promote CU entree to all eligible individuals – possible members from all walks of life
Based on our research, the population of Navan town is 30,500 and about 5,000 in the backwoods. With 30,335 members in Navan CU, this suggests that 85 % of those in the catchment country are already members of the CU. Therefore, Navan CU might look at prosecuting possible clients that are presently non being focused on by other fiscal establishments i.e. traveler community, refugees and the unemployed etc. Enter new markets to enlarge client base.
It has to be really structured with boards working together, pooling their assets etc. It besides can give entree to a new country and new members, through maintaining the amalgamation subdivision unfastened as a sub office. Merged CU ‘s would go subdivisions of larger Unions.
The above points are strategic challenges for the CU traveling frontward.
There are two jobs in the loan book, the first is the worsening loan Numberss and the 2nd is the rise in bad or dubious debt. 2008 was the highest twelvemonth for loans at a‚¬85m ; in 2009 it fell by a‚¬5m to a‚¬80m and 2010 by a‚¬4m to a‚¬76m. This is a tendency that is traveling to go on for the foreseeable hereafter. Importance of variegation in loan portfolio is greater now more than of all time.
Investings are going more and more a buffer to the diminution in the loan book. Investings need to be 100 % capital guaranteed and merely in Euro Government bonds of a certain high class, for illustration, such as Germany or France. This needs to be balanced with liquidness, while the bonds will be liquid in the market, need to keep a certain sum on manus in bank sedimentations.
The CU needs to be more rigorous about who they lend to. Under purveying for bad debts are running at 40 % below realistic degrees, regulator says. This is a suppuration job that can come back to do solvency jobs. ( Noonan, 2010 ) CU ‘s have information ( insider information ) on their clients so it should be easy to implement different loan rates and they besides have entree to information on the local community and local economic system e.g. Navan unemployment figures. As portion of this, it will better loan quality giving inducements to better borrowers.
Navan CU must advance consciousness and uphold public assurance. In looking for new members, the CU must care for the members they presently have, non merely the new or possible members. Promote CU entree to all eligible individuals through new merchandises and community development is recommended.
It is of import a dividend is paid yearly as this could assist halt any “ flight ” of member nest eggs to other fiscal establishments, hence assisting to maintain bing nest eggs and besides pull new members.
Amalgamations are likely the unknown factor and as such are seen as a menace. Where it could be an chance, Directors must confront up to their duties and be proactive in researching amalgamation chances in state of affairss where their ain CU is no longer feasible. This will name for leading ( strong and determined ) and hard and unpopular determinations. The option is failure of Numberss of CU ‘s, ensuing in loss of assurance in sector. ( Weston, 2010 )
In decision, if no action is taken, the CU sector – and Navan CU with it – will go on to lose loan book and diminution. If they will take the hazard of a growing scheme and basically seek to develope into a bank driven by net incomes ( good in short term ) , so the CU as we know it will worsen in the long term. To last and thrive, Navan CU, and Credit Unions in general, must remain steadfast in their nucleus values and differences: singularity of trade name, co-operation, community committedness and common ego aid. ( MCH, 2008 ) Strategy must be member driven and non gain driven. Afterall, “ CUs are embedded in their local communities in a manner that Bankss can merely woolgather of ” ( Garvey, 2010 ) .