WITH many working- and middle-class families battling high inflation and/or unemployment, people are taking desperate measures. Amongst these are some opting to borrow money from digital loan apps, many of which seem to operate outside of any regulatory control and criminally exploit borrowers.

The recent tragic death of a man in Rawalpindi, who reportedly took his own life after being hounded by digital loan sharks, highlights the need for the state to rein in these exploitative operations, and for people to exercise caution before turning to too-good-to-be-true lenders, who promise ‘easy money’.

As reported, the victim had taken a Rs13,000 loan through a digital app to help pay the rent and his children’s school fees. The victim had been unemployed for several months.

However, due to extortionate interest rates, the dues rapidly increased, and after borrowing more money from another app, the victim’s liabilities had ballooned into tens of thousands of rupees. Threats and blackmail by the loan sharks ultimately led the desperate victim to take his own life.

The FIA has moved in and reportedly raided the offices of the loan sharks. However, more thorough steps are needed to put these exploitative enterprises — which prey on desperate people — out of business.

Last year, the SECP had said that digital lenders had been forbidden from taking coercive steps while making recoveries, while the Competition Commission of Pakistan had urged people to exercise caution before approaching online lenders.

Clearly, the regulatory framework has failed to monitor these dubious operators, as the death of the Rawalpindi man shows. App stores, SECP and FIA all have a role in ensuring that digital lenders are registered, comply with national laws, and display terms in clear language the common man can understand.

People also need to steer clear of questionable enterprises that offer instant cash, and should opt for established microfinance institutions, while the state should also support financing options that can help people tide over difficult times.

Published in Dawn, July 15th, 2023