Shortage of Borrowers to Test Credit Unions’ Lending

By Jon Haller
Director of Market Research, CUNA

The percentage of credit union members in the "peak borrowing" ages of 25 to 44 has been dropping for the past several years (from 49% in 1993, to 45% in 2000). That is, credit unions, as a whole, have been losing more peak borrowers than they’ve been adding. And without dramatic changes, the percentage will continue to drop even more over the next several years.

As a result, credit unions are facing a threat to the relatively strong lending levels they enjoy today (recent economic- and terrorist-related events notwithstanding), and will continue to face this threat even more so, as the baby boomers start saving more than borrowing, and there are fewer borrowing-aged consumers to pick up the slack.

The impact?

If current member-penetration, loan-granting and other patterns hold true to form between 2000 and 2010, the loss to the credit union movement will be, using conservative estimates, about $425 million in loans per year, each year. That’s down $425 million after the first year, then $850 million more after the second year (for a grand total loss of $1.275 billion from "point-0"), and so on. That’s a lot of loans.

Sum these up, and it would sting the credit union industry for an estimated $23 billion (conservatively) to $35 billion (more realistically) over that 10-year period.

To avoid or limit any "damages" at your credit union brought about by a peak-borrower shortage, work to bring more people 25 to 44 into your membership, work to get more loans into the hands of your existing members or, ideally, both.

Also, strive to improve important aspects of your loan service, such as the approval time, ease of applying, staff knowledge of loan policies/procedures. Conduct member surveys to stay on top of members’ perceptions of these loan-service aspects and your market shares for your various loan products.

Other Issues of Research Review

Previous Issue:
Low Loan Market Shares Point to Opportunities for Credit Unions