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A Technical Guide to PEARLS: A Performance Monitoring System

This paper explores the PEARLS financial performance monitoring system, which is designed to offer management guidance for credit unions and other savings institutions. PEARLS is a set of 45 financial ratios used to evaluate and monitor the financial stability of credit unions within the World Council of Credit Unions (WOCCU). The ratios are grouped under six crucial areas of financial performance which are:

Protection
Effective financial structure
Asset quality
Rates of return and costs
Liquidity, and
Signs of growth

The PEARLS methodology is driven by financial performance. WOCCU believes that overall institutional performance is best measured by quantitative results. Thus, each indicator has a prudential norm or target goal specified by WOCCU on the basis of its field experience working to strengthen credit unions and promote savings-based growth. These standardised evaluation ratios and formulas create a universal financial language for organisations to internally evaluate themselves and compare with other credit unions, and to offer depositors (and regulators) the confidence that their savings institution meets widely accepted standards of excellence.

While PEARLS does not explicitly address management issues, it is designed to act as an early warning system for internal use by management. For instance, the use of the system permits managers to rapidly pinpoint troubled areas early and to make the necessary adjustments before the problems become grave, or to identify a weak capital base and the likely causes.