We’ve just finished a full year of strategic planning sessions with more than 30 credit unions. Credit unions of all sizes, charter types and complexity. A common question we addressed this year is “what can I do to grow”? More specifically, what can I do to grow loans?
We work with more than 200 credit union clients from Hawaii to Maine, so we get to see what makes high performing lenders tick. With this intel in mind, my short answer to the “how do we grow loans” question is: High performing small and mid-sized credit union lenders are very good at one or more of the following three things:
- A robust internal lending culture
- Utilize professional marketing firm
- Adapted and changed to pursue a more clearly defined target market, in a market where they can efficiently compete.
For this post, I want to take a few minutes and talk about the third one – adaptation.
Evolutionary biologists define Adaptation as “the result of an evolutionary process in which individuals within populations evolve traits over time that are better suited to their environment.” Successful adaptation happens when specific traits emerge that increase a species’ chances of survival.
Adaptation also applies to credit unions and the credit union movement as a whole.
Just like the animal kingdom, credit unions must adapt to survive. The credit union movement today is a prime example. Most of our credit unions have been chartered for at least 50 years (many, more than 80). That’s a considerable period of time for any business. To get to this point, each credit union had to adapt over time. But adaptation is not a “one and done” process – it’s an ongoing process to adapt in response to our changing habitat. And our habitat is changing more rapidly today than ever before. I suspect five years from now, the number of credit unions will drop by one-third. Truly, the future is reserved for credit unions that adapt and change. This applies to credit unions of any size.
Here is a good example of an adaptive credit union
Members Credit Union (Cos Cob, Connecticut) is a credit union that had to dramatically change its priority target market in order to adapt to significant environmental changes. MCU is a $40-million credit union located in one of the most economically polarized areas of the country: Greenwich, Connecticut. The credit union was chartered in 1935 to serve the educational community and served this group well for many years. However, during the past decade, the credit union has struggled to grow due to increased competition and an aging membership (sound familiar?).
Four years ago, marked a reflection point for the credit union’s leadership. They realized that if they wanted to remain relevant, they would need to make some changes (i.e., adapt). This adaptation included finding a new target market group within their field of membership, with high consumer-loan demand to serve. Leadership identified a lower-income, Hispanic target market in their field of membership that was underserved and largely unserved. This lower-income, minority group was the polar opposite of the predominately white, middle class (and aging) membership they had experience serving for 80-plus years. It was a sober realization that a lot needed to change to serve this new demographic. But leadership was energized by the prospect of serving a population who really needed a credit union – their credit union. If successful, they would have a market with less competition, greater potential for growth, better earnings, and, most importantly, greater service and community impact. Long story short, during the past three years, MCU has adapted its lending practices to better support risk-based lending. They have become knowledgeable in immigration matters to better serve non-citizens with accounts and loans. They committed to having ALL staff becoming CUNA FiCEP Certified Financial Counselors so that each employee had the tools they needed to teach and coach a new, underserved market. Their efforts expanded staff and board diversity and increased community partnerships to reach this new market. And to more fully demonstrate their commitment to serving their growing Spanish-speaking community, the entire non-Spanish speaking staff volunteered to take Spanish language classes to improve their ability to communicate with the people they value and serve.
Like most $40-million credit unions, MCU lacks many resources afforded to larger credit unions, and it would have been easy to give up. Rather than faint at the prospect of more work, this credit union – from the board to member-facing staff – were motivated by a desire to help people, and not only survive but thrive in their ability to serve the next generation. There has been a significant cultural shift (it’s an amazing place to work), Since 2017, loans, members and revenue is consistently growing.
The credit union pursued a methodical process to accomplish this significant strategic shift. It’s so popular now, new members are driving across the county to get to the credit union’s only branch office.
It’s important to note that this level of adaptation is not limited to credit unions with geographic/community field of memberships. There are many examples of limited bond/charters that have identified micro communities within their approved field of membership. For instance, Minority members within the existing field of membership.
Why it matters
Credit union pioneer, Edward Filene summed up the need for adaptation best: “Progress is the constant replacing of the best there is with something still better.” All credit unions, regardless of size or business model, need to be in constant search for something “still better” to compete and ensure our credit unions and the movement we serve are still here to welcome in the next decade.
