On the one hand, mergers are a key way for credit unions use to grow so they can serve more members and benefit from economies of scale.
On the other hand, the seventh international cooperative principle is “cooperatives helping cooperatives.” That would seem to suggest that credit unions should look to support one another rather than to take action that eliminates an organization.
In my work as a consultant, I’ve helped develop credit union merger policies, so I understand both arguments. Mergers should be in your tool belt—don’t get me wrong—but they should not be your primary means for growth. Think about the why of this from both a business model and a cooperative philosophy standpoint.
If your credit union needs to merge to grow, something is not right with either your strategy or execution. To test this idea, ask yourself how much you’re spending each year on marketing to drive membership and loan growth. Next, determine how much of the growth you’re experiencing is organic versus inorganic. Examples of organic growth include having branches or a social media program that produce memberships. Examples of inorganic growth are mergers, loan participations or purchasing share certificates. Now, reflect on whether you’re having to leverage inorganic growth methods because all the methods that you’re using to drive organic growth are not working. If that’s the case, you are not getting a return on your investment in marketing and physical infrastructure.
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