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Field of Membership and Performance: Evidence from the State of Utah

This report investigates credit union's field of membership and explores the effects of broader fields of memberships.

Executive Summary

Field of membership refers to the scope of a credit union's membership, which can be either broad or narrow. Changing economic and social conditions dictate the need to consider new, broader views of field of membership. Such views are controversial, both outside and within the credit union movement. Professor Ramon Johnson investigates this issue using the experience that Utah's credit unions have had with open fields of membership to expend on our knowledge about the effects of broader fields of membership. 

What is this research about?

Professor Ramon Johnson investigates the effects of open fields of membership in Utah by: (1) investigating the reasons why credit unions did or did not chose to expand their field of membership, (2) examining comparative financial data across credit unions with different degrees of expanded fields of membership, and (3) using a questionnaire to examine credit union members’ perceptions about their credit union across different degrees of expanded fields of membership.

Johnson finds that credit unions primarily used the opportunity to expand their field of membership to adjust to some set of circumstances that threatened the survival of the credit union. His results show that allowing those individuals who choose credit unions to have a wider choice of characteristics of credit has not led to a few large credit unions driving smaller credit unions out of the market. Johnson finds some difference with respect to financial data. However, many of these differences are explained by asset size rather than degree of openness of field of membership. In addition, some of these differences may be reflecting the mix of services offered by more open-field credit unions, and member preferences on such issues as high dividend rates vs. low loan rates or more financial services vs. higher capital ratios. On balance, once these factors, along with asset size, are taken into account, there does not seem to be clear differences related solely to field of membership.

What are the credit union implications?

Johnson's survey of members indicates they are satisfied with the credit union they have chosen, whether it is a full- or a limited-service credit union. His study indicates that if credit union members decide they are not happy with the services provided by their current credit union, the Utah situation allows them the freedom to switch to another credit union that does meet their financial needs.