Rizwan Tabassum—AFP
The Securities and Exchange Commission of Pakistan (SECP) on Wednesday announced it is proactively engaged with Google to counter the proliferation of illegal “easy loan” apps that have come under fire for predatory lending practices.
According to the SECP, the company has already removed 84 illegal lending apps from the Google PlayStore and introduced a Personal Loan App Policy for Pakistan, with effect from May 31, 2023. This makes Pakistan the sixth country in the world—after India, Indonesia, the Philippines, Nigeria and Kenya—where Google has introduced additional requirements for digital lending apps. The policy incorporates measures to prevent the listing of such apps and imposes strict requirements regarding access to consumers’ personal data.
Among the new policy measures is a requirement for all lenders to only have one app, with anyone who attempts to publish more than one app having their developer account terminated. Developers must also submit a Personal Loan App Declaration form before publishing their app and provide proof of approval from the SECP to offer or facilitate digital lending services in Pakistan.
Google has also prohibited digital lending apps from accessing sensitive data, such as external storage, media images, contacts, and location, which users in Pakistan had alleged were being used by the apps to extort money from them. The new policy further bans apps offering short-term personal loans that require repayment in full within 60 days from the loan issue date.
In its statement, the SECP stressed that it is committed to continuously reviewing and reforming policies to foster the development of capital and financial markets. It said its policies were aimed at promoting ease of business through technology, enhances financial inclusion, reducing entry barriers, and enforcing laws transparently to protect people’s rights.
It noted that in December 2022, the SECP had implemented borrower protection requirements for digital lending non-banking financial companies, including the transparent disclosure of fees and loan terms to customers before disbursement. Its policy also required call agents to utilize registered numbers and recorded lines. In an advisory to borrowers, it suggested reviewing the legal status of lending apps before signing up for loans. It also advised borrowers to read and evaluate the disclosures regarding fees, late payment charges, loan tenor, cooling-off period, and the privacy policy of applications before signing in. “Users are also advised to report complaints against licensed apps to SECP through the dedicated complaint portal at SECP’s website,” it said.
The SECP has a two-tier process for companies engaged in digital lending. The first tier involves obtaining an NBFC license, which entails conducting due diligence, evaluating sponsors and directors, and appointing an independent director. The second tier includes app approval based on the CSAF auditors’ certificate, which ensures the security of data and apps by assessing disclosure requirements.