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Establishing a growth mindset during economic decline

By Sam Brownell - March 31, 2020

Originally posted on CUInisght

Credit unions have historically seen growth during declining economic times, such as the Great Recession. While everything going on in today’s world due to COVID-19 may seem frightening, there is also a significant opportunity for credit unions to acquire new members! The graph below shows the growth of credit unions compared to banks based on total number of assets during and after the recession.

Cumulative Asset Growth ChartSource:CUNA Data

Here are some ways to make sure your credit union is ready for growth during and after a recession.

Field of Membership

You will want to make sure that your field of membership can withhold a recession. This strategy will include diversifying the members you serve. If you are a credit union that serves organizations such as the airlines industry, you may want to look at adding other SEGs or census tracts to counteract any adverse changes to that industry.

Membership Eligibility

Now is a time the consumers will look to leave their banks and switch to credit unions for more financial support. Is your credit union prepared? You will want to make sure potential members can determine if they can join your credit union easily. Field of membership rules are often seen as a barrier to entry for some potential members. It is crucial that you have an eligibility tool in place so both your staff and potential members know who they can join and why.

Credit Union Membership Growth

Source: NCUA Call Report Data

Low-Income Designation

There are a variety of benefits to becoming a low-income designated credit union. You can receive nonmember deposits enabling you to build assets with funds from sources outside your limited field of membership. You can take on secondary capital, which counts towards statutory requirements and can be used to support growth. Lastly, organizations that earn the low-income credit union designation are exempted from a loan cap, granting you the unrestricted ability to offer commercial loans, as long as they comply with all other aspects of NCUA’s member business loan rules.

Whatever your strategy is to combat the upcoming recession, now is the time to act on it. The COVID-19 pandemic will start to flatten, and business will begin to return to normal. These next few weeks working remote are the perfect time to dedicate more hours to focusing on your credit union’s growth and executing on a plan to make your credit union recession-proof.

 

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