Much Ado About Digital Loan Apps By Elvis Eromosele

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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 intimidation, 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.