Determinants of credit card demand in Kenya

Abstract

Despite the advantages that credit cards offer, the growth of the credit card industry in Kenya has been slow. The purpose of the study is to investigate the factors that influence demand for credit cards and in particular to explore the extent to which independent variables selected from existing literature namely, credit card reward programmes which reduce credit card cost, consumer cultural aversion towards credit card indebtedness, availability of substitutes such as personal loans and consumer income level, impact such demand. A case study strategy focusing on Barclays Bank of Kenya Limited is adopted on the basis that Barclays as market leader in the credit card market in Kenya is a good source of information regarding the success and challenges of growing a credit card base in Kenya. Data was collected through a structured telephone survey of 404 Barclays customers. The cross sectional data was analysed using a logistic regression to explain the causal relationship between demand for credit cards and the selected independent variables. The findings of the research reveal that credit card demand is negatively impacted by the presence of reward programmes, the availability of personal loans and the consumers‟ fear of debt. Consumer level of income though positively related to credit card demand is not significant. The findings suggest that credit card issuers should invest in educating consumers on the benefits of responsible credit card use. Also, since convenience is the primary motivator for credit card acquisition credit card issuers should ensure that modern avenues employed to propel credit growth namely reward programmes are targeted to meet the consumers need for convenience.