MADISON, Wis. (7/29/13)--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, says a new Filene Research Institute report.
Beyond deposit-based dividends, members extend implicit flexibility to boards and managers about how that shared surplus should be used, said the report, "Patronage, Loyalty, and Credit Unions' Shared Surplus," by Daniel Cote, a professor at HEC Montreal.
Most members don't think of the surplus as theirs, because most credit unions don't talk about it that way. However, 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, said Filene.
The report was produced in partnership with Credit Union Central of Canada, and challenges readers to 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 examines the academic research behind loyalty, including Cote's own thinking about how a "new cooperative paradigm" can invigorate credit unions that cultivate loyalty.
The second part analyzes how three Canadian and three U.S. credit unions use their surpluses--in very different ways--to return value to members.
The report says the implications for credit unions are:
To access the report, use the link.