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Building High Loan/Share Ratios: Challenges and Strategies

This report presents an historical perspective on credit unions’ lending and uses a survey of credit union CEOs to isolate those factors leading to a successful lending program.

Executive Summary

In this report, Albert E. Burger and William A. Kelly express great concern about the slowdown in the growth of lending by credit unions. They show that loan/share ratios have slipped from pre-1980 norms of 80 percent or more to below 60 percent in the 1990s and analyze the causes of this striking decline. To provide strategies that credit unions can use to offset this disturbing trend, the researchers then report the results from the survey responses of 584 credit unions that maintained a loan/share ratio of 80 percent or higher. When developing their perspective on the behavior of credit unions’ loan/share ratio, the researchers analyze credit unions’ lending behavior in the early 1980s, recent credit union lending, and credit unions’ consumer lending.

What is this research about? 

In their presentation of strategic factors affecting the lending process, Burger and Kelly present evidence on success factors related to the CEO’s view of the credit union’s primary purpose, the role of boards of directors in the lending process, marketing, training, incentives, application and approval process, and turnaround time for loan approvals.

What are the credit union implications?

Success in lending is essential if credit unions are to be viable financial institutions in the future. Lending produces member satisfaction and patronage. It is the leading source of credit union revenue that makes the organization’s overall operations possible. Lending revenue provides funds for dividends on member savings and it permits credit unions to build adequate capital.  

This report was sponsored by The Center for Credit Union Research at the University of Wisconsin—Madison.

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