Rise in short-term interest rates to push loyalty points redemptions

The stage has been set. Banks have begun raising interest rates on short-term mobile loans in line with the new Central Bank Rate, which is likely to push consumers to alternative coping strategies like redeeming loyalty points.

KCB Bank has announced reviewing charges on KCB M-PESA loan to 8.85 percent up from 8.75 percent, following the review of the Central Bank Rate (CBR) by CBK from 8.75 percent to 9.50 percent.

Many Kenyan consumers rely on short-term loans such as Fuliza, M-Shwari, and KCB M-PESA to meet monthly spending shortfalls.

With the expected increase in charges, consumers will be pushed to new ways of coping such as redeeming billions of loyalty points like supermarket rewards and Safaricom’s Bonga points.

Kenyans have been hoarding Bonga points, a loyalty scheme that lets Safaricom Prepay and Postpay subscribers earn credit immediately once registered whose value hit Kes4.5 billion in March 2022 from Kes3 billion in 2015.

Safaricom has expanded the options for redemption to include supermarket shopping through Lipa na Bonga, the purchase of shares at the Nairobi Securities Exchange (NSE), air time, phones purchase and even airline travel tickets.

According to an American Banker report, Shoppers usually look to reward programs as cash-saving options as more consumers seek cash-back reward programs during times of high inflation.

In March, Kenya’s inflation stayed flat at 9.2 percent, pushing consumers to scratch off discretionary shopping lists, trading down on brands, and strictly rationing what they have in their pantries and bathrooms until replenishing.

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