Today, everyone is
talking about digital loan apps. They have been branded as villains and evil
entities. This is not the complete story.
Digital loan apps
provide a useful financial function. They provide loans. This is an important
financial inclusion service. When people talk of financial inclusion, it is
usually only in the context of opening a bank account. But it should be
more.
Access to funds,
loans, is a huge step in driving financial inclusion. Indeed, access to funds
is an indispensable ingredient for socio-economic growth and prosperity.
Why is financial
inclusion important? It is an essential enabler of developmental goals in the
Sustainable Development Goals (SDGs). Consider this, whether in eradicating
poverty, ending hunger, achieving food security and promoting sustainable
agriculture; providing health and well-being; achieving gender equality and
economic empowerment of women; promoting economic growth and jobs; access to
funds can make the difference between failure and success.
Access to funds
leads to positive economic outcomes including increasing productivity and
profits and greater investment in businesses.
Without a doubt,
access to funds can boost investment, drive consumption and spur socio-economic
growth. So, if access to funds is that important, why don’t banks provide this
important service?
They are supposed
to and in fact, claim to. The consensus, it would seem, is that the hurdles to
clear to have 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 loan apps appear almost heaven-sent. They promise access
to loans with only a few clicks and deliver spectacularly. They provide access
to loans without cumbersome paper works. They provide a useful service and
deserve commendation.
The problem comes
when the people that collect the loans are unable to pay. Whatever the reasons
they may proffer, defaulting on the loan triggers and releases “the
beast” in the loan firms.
They want their
money and want it quick. They resort to underhand methods that skirt the hem of
decency and proper conduct. They cross the line and break the law. This
precisely is the problem with these digital loan apps. They operate below the
radar like they are in a jungle without laws.
Granted, many loan
apps are on Google Playstore, but are they registered businesses in Nigeria?
This is the critical question. If the loan apps are operating without
regulation or guidelines, who do we blame? Some agencies of government have
failed in their responsibility. The relevant personnel, agency, also needs to
be penalized.
When a person
takes a loan and defaults, they harass the contacts, blatantly invading
people’s privacy, use blackmail and other underhanded tactics in seeking to get
the loanee to repay the loan. Their harsh modus operandi is now their defining
characteristic. The outcry against them has equally been vehement.
Why there is all
sort of reasons why people may be unable to repay their loans as at when due.
The loan apps must look at ways to get their monies without unduly involving
and harassing other people who know absolutely nothing about the transaction.
They should also be wary of unnecessary threats, harassment and intimation
that
Aside from those
on Playstore, others invade people’s DMS pledging with them to download the app
via the link they send. To many, they have become a menace that needs to be
curbed, curtailed and regulated.
It is not
surprising therefore that the federal government have determined that a number
of them are operating illegally in the country. The real wonder is that the FG
is only just finding this out.
Now, as part of
efforts to regulate the loan apps, the FG through an Inter-Agency Joint
Regulatory & Enforcement Task Force of FCCPC, NITDA, ICPC recently raided
some of the loan apps offices in Lagos State.
There are reports,
many of them unconfirmed, of people who have taken their lives or developed
high blood pressure because of the unscrupulous activities of these loan
apps.
The grudge against
them is numerous and grievous. The twin sins of these loan apps are defamation
of character and excessive interests.
The quest to
regulate the operations of the loan apps is completely in order. The way and
matter the government goes about it also needs to be in order. Government
agencies can’t break the law in the haste to stop a wrong. Two wrongs can never
make a right.
The head of FCCPC,
Babatunde Irukera, has been quoted as saying that the activities of the digital
money lenders would now fall under regulatory control. This is a good first
step.
When there are
guidelines, the responsible loan apps will, no doubt, work to meet and abide by
them. This is the proper thing to do and this is the right way to go.
While the loan
apps may well have a genuine reason for their operational method, it has been
adjudged offensive, invasion of privacy and against the law. They urgently need
to stop.
Furthermore, they
should do proper due diligence before handing out money like confetti. Do they
do KYC? Do they consider the ability to repay? Are there contingency plans in
place to tackle default and defaulters?
Maybe we should
even ask where do they get the funds that they disburse?
Going forward, the
loan apps urgently need to clean up their act. They are performing a useful
service to the economy. Providing quick and easy loans at a moment’s notice is
something most banks can only dream about. They should now learn to do things
the way things should be done without breaking the rules and causing
offence.
On FCCPC asking
Google to remove the apps from Playstore, the truth is that Google is not under
any obligation to heed the FCCPC’s directive on delisting the offending loan
apps from its store unless the agency can show good cause.
There are
stringent rules for this sort of thing. It involves reporting through the
appropriate channel, indicating the specific rules broken by the loan apps and
providing evidence.
Of course, the
government can in principle make representation to Google directly to help move
things along smoothly.
Let’s not be hasty
in knocking the digital loan apps. This should not be another case of throwing
away the baby with the bathwater. There are issues, yes. But they can be
resolved with appropriate action on the part of all the parties involved. Let
the government agency lay down the proper rules and regulations. This is the
right way to go.
Elvis Eromosele, a Corporate Communication professional and public
affairs analyst lives in Lagos.
