Google to Ban Unlicensed Micro Lending Apps: SECP

Digital micro and nano lending is a developing trend in the country that permits unsecured short-term loans and the sector was primarily dominated by non-licensed firms. After our research, we saw that most of these unlicensed apps were loan sharks and charge high-interest rates. In this regard, according to the Securities and Exchange Commission of Pakistan (SECP), Google has agreed to ban all unlicensed digital lending apps in Pakistan, the majority of which were operating outside the nation.

The SECP will supply Google with a “white list” of approved firms by the end of March 2023. The deadline for digital lending companies to update their applications is March 27, after which the final list will be compiled.

SECP Executive Director Khalida Habib announced yesterday that the Commission has published a circular outlining the digital lending criteria applicable to Non-Banking Finance Companies (NBFCs) conducting lending activities via digital channels/ mobile applications (Apps).

She was presenting at a session on financial reporting for the Non-Banking Microfinance (NBMF) sector in light of new Circular 15 regulatory requirements. She stated that the SECP developed the lending criteria to address concerns around mis-selling, data privacy breaches, and coercive recovery methods of registered digital lending organizations. She further informed that the Commission has approached all relevant regulatory agencies, including the PTA, FIA, NTISB, and SBP, as well as Google and Apple, concerning the removal of unauthorized applications.

“Following negotiations with the Google liaison office in Pakistan, 58 illegal digital lending apps were deleted in January 2023,” Habib stated.

Prior to loan payment to the borrower, SECP has mandated minimum mandatory disclosures for digital lenders through Circular 15. They include the approved loan amount, annual percentage rates, loan term, installment/lump sum payment amounts with dates, and all fees and charges, as well as the Important Fact Statement (KFS).

To discourage unlicensed digital lenders, the licensed digital lender will be required to disclose its full corporate name and licensing status on its lending platform(s)/App(s) and ensure that any advertisement and publication is fair and does not contain misleading information, Khalida said. Moreover, she added that SECP has also specified a comprehensive grievance redressal mechanism in addition to the existing NBFC grievance redressal framework.

Circular 15 stipulates that digital lenders are not permitted access to a borrower’s phonebook, contacts list, or photo gallery, even if the borrower has given permission for such access.

From January to November 2022, NBFCs engaged in digital lending and disbursed 2,402,301 loans totaling Rs63.58 billion to 2.4 million borrowers in the form of 3,738,719 loans. Hence, the average loan size is Rs17,000.

Musarat Jabeen, the Executive Director and Spokesman of the SECP, also presented a presentation outlining the Commission’s general objectives and future perspective in terms of enhancing financial inclusion, market development, and ease of doing business.

Check out? Fraudulent Micro Loan Apps Fooling & Spying on Pakistani Users