Want to Boost Loans? Increase Member Loyalty

CUs likely will have negative loan growth in 2010—the first time that’s happened in 30 years.

November 16, 2010
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CUNA projects there will be negative loan growth (0.1%) in 2010—the first time in 30 years that loan growth has been in negative territory.

Behind the lending downturn is high unemployment, a protracted recession, and a desire by members to pay off existing debt before taking on any more.

As if these challenges weren’t enough, credit unions are dealing with a shrinking pool of strong potential borrowers (members ages 25 to 44), which limits lending opportunities even further.

Some credit unions have discovered the best way to grow their loan portfolios is to capture loans members have gotten from other lenders. To do this effectively, credit unions first need to increase members’ loyalty, according to CUNA’s Member Survey Benchmarking Database and its Credit Union Member Satisfaction, Growth, and Loyalty benchmarking report.

The Ohio Credit Union League’s eLumination Newsletter examines the future lending landscape and what credit unions must do to be successful during these trying times.

“Loan demand isn’t going to grow, and most likely it will continue shrinking. Therefore, the key will be growth through taking market share from other financial institutions, rather than waiting for new demand.”

The opportunity is clearly there for the taking. At least half of members with loans got those loans from a lender other than their credit union, according to CUNA’s Member Survey Benchmarking Database:

Market Shares

The eLumination article points out, “Credit unions that find ways to capture existing loan market share will enjoy a future in the credit union movement. Many are having success through diligent efforts to leverage member data to solicit new lending.”

Next: Exploit member data

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