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Patronage, Loyalty, and Credit Unions’ Shared Surplus

Patronage, Loyalty, and Credit Unions’ Shared Surplus

At the base of a member’s credit union relationship lies the promise of surplus—whatever a credit union earns in excess of its expenses is to be used on behalf of or returned to members. Beyond deposit-based dividends, members extend implicit flexibility to boards and managers about how that shared surplus should be used. Most members don’t think of the surplus as theirs, because most credit unions don’t talk about it that way. But credit union leaders, as stewards, should think about that surplus and how it should be used to grow, to deliver value to, and to strengthen the cooperative.

This report, produced in partnership with Credit Union Central of Canada, challenges readers to think about the shared surplus and consider how practices like patronage dividends, incentive programs, and strategic use of the surplus can engender loyalty and strengthen the credit union. The first part of this report examines the academic research behind loyalty, including Professor Côté’s own thinking about how a “new cooperative paradigm” can invigorate credit unions that cultivate loyalty.

The second part of the report analyzes how three Canadian and three US credit unions use their surpluses (in very different ways) to return value to members. In these six in-depth case studies, cash dividends are one way, but rarely the only way, to distribute the surplus to members.

As you think about how your surplus is spent, consider the ideas here. Support growth and stay safe, of course. But also consider dividends, loyalty programs, and returning value in a way that binds members to your credit union.

Categorized: 'Strategy'

Tagged: 'patronage dividends' 'shared surplus' 'member loyalty' 'value' 'member satisfaction'

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Comments on this Report

The idea of a cooperation was firmly established in this article.  If credit unions are serious about differentiating themselves as a co-op who is truly member-owned, then they will focus on these reward/benefit programs.  The philosophy of cooperation can only be manifest when credit union leadership will put their money where their mouth is.  It is encouraging to read about these six exemplary credit unions who truly do care about their members.

Saying that you are a credit union and acting like a bank does not fool the public.  They can see right through the name “credit union”.  The cooperative movement is truly shown when the credit union leadership can look at the surplus without greed and truly do what their mission statement says.  Otherwise, they should become a bank if they want to plow-back a large portion of the surplus for their shareholders who are concerned about “growth” and “investment into future operations”.  These are important but they have a history of being used as bonuses for the top executives to “retain their leadership skills”.  More humble leadership as shown in these credit unions is essential to keep the Credit Union Movement alive.

Thanks for another great article!

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