Credit union policies and performance in Latin America

This paper explores empirical linkages between credit unions' (CUs') polici es and their financial performance, as measured by loan delinquency and pro fitability, using a unique micro dataset of credit unions in three Latin Am erican countries. The estimated translog profit function is generalized usi ng a slack variable concept that parameterizes any systematic deviation fro m profit-maximizing behavior exhibited within the sample. In general, we fi nd that performance depends in important ways on two types of CU policy var iables, some associated with the incentives of borrowers to repay and other s that affect the CU's ability to screen loans, (C) 1999 Elsevier Science B .V. All rights reserved. JEL classification: O54; G21.