WITH the evolution of e-commerce in Pakistan, more and more people have started opting for digital solutions for their personal finance needs. Such solutions include the relatively well-known online payment apps operated by the major telecommunications companies, but also newer concepts like buy now, pay later (BNPL) and digital lending services. While several legitimate companies licensed by the SECP have been providing these services, the demand has also lured loan sharks looking to trap gullible people. They are offering ‘easy’ loans to all and sundry through various mobile apps, often without paperwork or any due diligence. The interest charged on these loans is usually obscenely high and is often hidden or misrepresented to the borrowers. Once these apps are installed, the lending companies easily gain access to the phone numbers in their victims’ phones, along with other sensitive data like personal pictures, etc. If their ‘customers’ fail to keep up with their loan’s difficult repayment conditions, as they invariably do, these companies either start threatening them or calling their contacts to create social pressure on them to pay up. As mobile phone adoption is considerably high in Pakistan while financial literacy remains low, these digital loan sharks have made quite a killing and put numerous people in great misery. Hopefully, that is about to change.

With Circular No 15, issued on Wednesday by the SECP, all digital lending platforms operating have been forbidden from making recoveries from their ‘customers’ through coercive measures or shifting their personal information to any place outside Pakistan’s legal jurisdiction. The regulator has also notified digital lending standards, which include measures to ensure that all lending companies make the terms of their loans explicit and accessible for potential borrowers, including the “loan amount approved, annual percentage rates, the tenor of the loan, instalments/lump sum payment amounts with date, and all charges”. It has further barred lenders from accessing borrowers’ phone books or photo galleries or calling their contacts, even if they have permission to do so. The SECP has also specified a comprehensive grievance redressal mechanism to protect consumers’ interests. It is good to see the regulator waking up to the risk unchecked growth in digital finance can pose. While the evolving digital ecosystem should continue to be encouraged and given space to grow, it cannot do so unregulated. The SECP should continue tightening its oversight of this space to block any exploitative practices from taking root.

Published in Dawn, December 30th, 2022