Today everyone is talking about digital loan apps. They have been referred to as villains and evil entities. This is not the full story.
Digital loan applications offer a useful financial function. They give loans. This is an important financial inclusion service. When people talk about financial inclusion, it’s usually only in the context of opening a bank account. But it should be more.
Access to funds, to loans, is an important step in promoting financial inclusion. Indeed, access to funds is an essential ingredient for socio-economic growth and prosperity.
Why is financial inclusion important? It is a key enabler of development goals in the Sustainable Development Goals (SDGs). Consider this, whether in eradicating poverty, eliminating hunger, achieving food security and promoting sustainable agriculture; ensure health and well-being; achieve gender equality and women’s economic empowerment; promote economic growth and employment; access to funds can make the difference between failure and success.
Access to funds leads to positive economic outcomes, including increased productivity and profits and increased business investment.
Undoubtedly, access to funds can stimulate investment, stimulate consumption and stimulate socio-economic growth. So, if access to funds is so important, why don’t banks provide this important service?
They are supposed to and, in fact, claim to. The consensus, it seems, is that the hurdles to overcome to access funds are almost insurmountable for the average person or small business. I’ll let more knowledgeable people discuss this point.
This is why the emergence of digital lending apps seems almost like heaven. They promise access to loans in just a few clicks and offer spectacular benefits. They provide access to loans without cumbersome paperwork. They provide helpful service and deserve praise.
The problem arises when the people collecting the loans are unable to pay. Whatever reasons they may cite, loan default triggers and unleashes “the beast” in lending companies.
They want their money and want it fast. They resort to underhanded methods that circumvent the hem of decency and good conduct. They cross the line and break the law. This is precisely the problem with these digital loan applications. They operate under the radar as if they were in a lawless jungle.
Sure, many loan apps are on Google Playstore, but are they registered companies in Nigeria? This is the critical question. If lending apps operate without regulation or guidelines, who would we blame? Some government agencies have failed in their responsibility. The staff involved, the agency, should also be penalized.
When someone takes a loan and defaults, they harass contacts, blatantly invading people’s privacy, use blackmail and other underhanded tactics to try to get the lender to repay the loan. Their tough modus operandi is now their defining characteristic. The outcry against them has also been vehement.
Why There are all sorts of reasons why people may be unable to repay their loans when due. Loan applicants should look for ways to get their money without unduly involving and harassing others who know absolutely nothing about the transaction. They should also be wary of unnecessary threats, harassment and intimations that
Aside from those on Playstore, others invade people’s DMS by pledging to download the app through the link they send. For many, they have become a threat that must be stopped, reduced and regulated.
It is therefore not surprising that the federal government has determined that a number of them are operating illegally in the country. The real wonder is that the FG is just finding out.
Now, as part of efforts to regulate loan applications, the FG, through a joint inter-agency FCCPC, NITDA, ICPC Regulatory and Enforcement Working Group, has recently raided some of the Loan application offices in Lagos State.
There are reports, many of them unconfirmed, of people committing suicide or developing high blood pressure due to the unscrupulous activities of these loan apps.
The grudge against them is many and cruel. The two sins of these loan applications are defamation of character and excessive interest.
The quest to regulate the operations of lending applications is entirely in order. The way the government does it must also be in order. Government agencies cannot break the law in a rush to stop an evil. Two wrongs can never make a right.
The head of FCCPC, Babatunde Irukera, reportedly said that the activities of digital money lenders would now fall under regulatory scrutiny. It’s a good first step.
Where guidelines exist, responsible lending applications will no doubt strive to follow and adhere to them. It’s the right thing to do and it’s the right way to go.
While lending apps may have a real rationale for the way they operate, they’ve been found to be offensive, privacy-invasive, and against the law. They urgently need to stop.
Also, they need to do their due diligence before handing out cash like confetti. Do they do KYC? Do they consider repayment capacity? Are there contingency plans in place to address failures and defaulters?
Maybe we should even ask where do they get the funds they disburse?
Going forward, loan applications urgently need to clean up their act. They render a useful service to the economy. Offering quick and easy loans anytime is something most banks can only dream of. They should now learn to do things the right way without breaking the rules and without causing offense.
FCCPC asking Google to remove apps from Playstore, the truth is that Google is under no obligation to follow the FCCPC’s directive on removing offending lending apps from its store unless the agency can prove a valid reason.
There are strict rules for this stuff. This includes reporting through the appropriate channel, indicating specific rules broken by lending applications, and providing evidence.
Of course, the government can in principle make representations directly to Google to help get things done smoothly.
Don’t rush to hit digital loan apps. This shouldn’t be another case of throwing the baby out with the bathwater. There are problems, yes. But they can be resolved with appropriate action by all parties involved. Let the government body establish the appropriate rules and regulations. This is the right way to go.
Elvis Eromosele, a corporate communications professional and public affairs analyst, lives in Lagos.