Jul 01 2013

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.

Report Number 304