Decline in Value of Safaricom’s Bonga Points Indicates Increased Redemption by Customers

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The value of unused Safaricom customer loyalty awards, known as Bonga points, has reached its lowest point in 12 years. This signals a rise in customer redemptions after the introduction of an expiry date. Safaricom’s latest annual report reveals that as of March 2023, unredeemed points were valued at Ksh 2.97 billion, reflecting a 34.2 percent decrease from the previous year’s Ksh 4.51 billion. This decline marks the lowest point since 2012 and is attributed to Safaricom’s decision last year to set an expiry date for all points older than three years.

The introduction of the expiry date prompted customers to redeem their points more aggressively for various purposes. These includes purchasing phones, accessories, air tickets, fuel, education loans, and shares on the Nairobi Securities Exchange. Safaricom also implemented a restriction on the time frame within which customers can use data resources acquired through Bonga points, encouraging further redemptions by limiting usage to seven days.

Points redemption plays a significant role for Safaricom as they are accounted for as a liability or deferred income until utilized by customers. The decrease in the value of unused loyalty points allowed Safaricom to reduce its total deferred contract liabilities, which include unused airtime, data, and bulk messages, to Ksh 11.73 billion from Ksh 12.15 billion.

The Bonga point scheme, launched in 2007, rewards subscribers with one Bonga point for every Ksh 10 spent on voice calls, SMS, data, and M-Pesa services. This loyalty program applies to individual subscribers as well as enterprise business customers, who can also earn points by achieving revenue targets. Safaricom recognizes revenue from redeemed points either at a specific point in time or over time, depending on the usage of acquired resources. Additionally, revenue from remaining loyalty points is recognized when SIM cards are churned. The same concept is applied to recognize airtime revenue, where prepaid airtime remains as deferred revenue until used by customers.

Opinion: The decline in the value of unused Bonga points is a direct result of Safaricom’s decision to introduce an expiry date. While this move prompted increased redemptions by customers, it has also allowed Safaricom to reduce its deferred liabilities. By implementing measures to encourage point redemption, Safaricom is effectively managing its loyalty program and maintaining a healthy financial position. The redemption of Bonga points provides value to customers and positively impacts Safaricom’s revenue recognition process.


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