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CU System
Filene explores patronage dividends
MADISON, Wis. (8/10/11)--“Credit Union and Cooperative Patronage Refunds,” the newest report from the Filene Research Institute, examines patronage refunds, a tool credit unions and other cooperatives use to manage capital levels, return value to members, and tie members more closely to their organizations. Authors Joel Dahlgren, and Dan Kitzberger examine the details of common refund practices outside the credit union system and weigh the pros and cons of how the practice is increasing within the credit union industry. “The patronage dividend is a back-to-the-future tool that allows credit unions to reward cooperative ownership, build member loyalty, and stimulate growth,” said Mark Meyer Filene CEO. “We know that capital positions are under stress at many credit unions, but there is long-term value in the process, and it is one of the few true differentiators available to credit unions.” Using cooperative theory, Dahlgren and Kitzberger argue that credit unions should go beyond traditional interest-rate thinking to consider patronage dividends as a long-term commitment to the most loyal members. The difference between a cooperative—such as a credit union--and an investor-owned firm resonates in how well the cooperative rewards members who contribute the most to its ongoing success. The 64-page report features:
* Three credit union case studies that show how $887 million asset CoVantage CU, Antigo, Wis.; $1.4 billion asset Dow Chemical Employees’ CU, Midland, Mich.; and $2.1 billion asset Wright-Patt CU, Fairborn, Ohio, calculate their patronage refunds and why they see value in offering them; * An in-depth examination of how patronage refunds affect tax liability at non-credit union cooperatives; and * Discussion of how patronage dividends drive a member-centric conversation about capital management.
The report redirects discussions about managing capital into considerations about rewarding credit union owners.
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