Credit Union and Cooperative Patronage Refunds - Filene ...

Our response to the blog post question about co-op profitability
would be the following:
Thank you for your comments. Credit unions need profits to sustain
themselves, so if a comparison with a bank is helpful for identifying
areas of inefficiency, that comparison is not objectionable. We
know you will appreciate hearing that credit unions are not capital
hogs, and that their genetic makeup—being from the family of
cooperatives—is to return unneeded earnings and capital to members
in the form of patronage refunds. Cash is returned to members as
soon as possible because there is no incentive for the co-op to hoard the
cash for itself, or for members to leave their equity in the co-op hoping
that it will appreciate in value. The same thing cannot be asserted
about the expected behavior of an IOF bank. Consequently, the more
successful a cooperative is, the more capital that it returns to its users
on the basis of patronage.
In this chapter we addressed the issue of why cooperatives need earnings
and how the cooperative’s business objectives are geared toward
the financial and economic benefit of members rather than the
cooperative. In Chapter 3 we will address the mechanics of patronage
refunds in the abstract. In Chapter 4, we will apply the requirements
of four alternative co-op tax regimes to the payment of patronage
refunds.
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