ISLAMABAD: For the cybersecurity of individual borrowers, the regulator has made it mandatory for digital nano lending companies to get their mobile apps certification from the Pakistan Telecommuni­cation Authority (PTA).

Through draft regulations for Non-Banking Financial Companies, the Securities and Exchange Commission of Pakistan has also prohibited these companies from using coercive and unacceptable collection practices for recoveries.

The draft circular is likely to be notified next week making it mandatory for digital lending NBFCs to provide full and accurate disclosures including products, services and applicable terms and conditions to borrowers, customers and other stakeholders.

After the amendments are notified the disclosure requirements for the digital lending companies will be stricter than that of the microfinance companies.

Firms barred from using coercive recovery methods; accessing users’ data

The lenders will have to inform the borrowers about their rights including the pricing policies of the company over the loans, etc.

After receiving complaints from the borrowers that the digital lending companies used unethical measures to harass the clients for recoveries, the SECP has restricted the digital apps from accessing users’ data for their privacy and data security.

For ensuring that this condition is fulfilled all the nano lending companies will have to be registered and get no objection certificates (NOC) from the PTA. This will allow the authorities to know if these apps contained any illegal options including viruses to siphon off the data of the customers.

Currently, there are seven firms in this sector but three nano-loaning digital NBFCs -- Tez, Barwaqt and Sarmaya -- are licensed and operational, while Microcred and Gold Lion have recently obtained licences from the SECP.

Since the State Bank of Pakistan is the regulator of the banking and micro-banking sector, the digital nano-loaning business is completely based on the smartphone and comes under the regulatory ambit of the SECP.

Sarmaya Microfinance CEO Habib ur Rehman said that there were complaints against the coercive recovery tactics of the unlicenced nano digital apps, which operate from outside Pakistan and the only way for them to recover a bad loan was to blackmail their clients.

Published in Dawn, December 11th, 2022