WASHINGTON-Member business loans are as good for credit unions' financials as they are for their image of helping to kick-start the nation's economy, one economist recently pointed out. During a presentation at NCUA's Partnering and Leadership Successes Member Business Lending Workshop, CUNA Chief Economist Bill Hampel told about 200 attendees that offering member business loans comes at little risk to credit unions, yet, only 1,637 (16.9%) offer them. He added that those credit unions that are providing business loans to members could afford to take on additional loans-and risk-in the area. Nearly 85% of credit unions offering member business loans have just 0-5% of their assets devoted to them, which means they have plenty of room before they near the 12.25% of assets cap. "You have not done this in a profligate way." Hampel said. "You can take on a little more risk on the member business lending side." He observed that credit unions, as nonprofits, are less likely to take on risk because the additional risk is not beneficial to the institution's officials. While Hampel noted that business loans are more volatile than consumer loans and have a slightly higher delinquency rate, the net chargeoffs from business loans are far lower than credit union loans in general. "Be cautious but just don't be too cautious," the economist advised. In the first half of 2003, just 0.04% of member business loans were charged off, as opposed to 0.5% of all credit union loans, according to Hampel. -email@example.com
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