ISLAMABAD: Taking note of the large number of complaints against the digital lending platforms, the Securities and Exchange Commission of Pakistan (SECP) has decided to take strict actions against fintechs in case of leakage of their clients’ data and the complaints will be inquired into on a regular basis.

The SECP has directed digital lending non-banking finance companies (NBFC) to increase the payback period for ‘nano loans’ from 21 days to 30 days and to launch awareness campaigns informing clients that non-payment of the loan will place them on the financial sector’s blacklist.

At a meeting held recently between the SECP and representatives of eight digital lending NBFCs, it was decided that the call centre staff of the fintechs needed specialised training to inform them about the repercussions of non-payments.

However, the focus of the meeting, presided over by SECP Chairman Amir Khan, remained on the performance of Seedcred and Sarmaya, the only two instant digital lending platforms that provide nano loans of up to Rs25,000 by transferring the money into the accounts of clients.

Orders increase in ‘nano loan’ payback period to 30 days

The meeting noted that 609 complaints have been lodged against Seedcred, which has given loans amounting to Rs4.3 billion. An official of the company said that few customers had a habit of not paying back their loans.

Responding to the queries regarding complaints, the executives of Seedcred said that there were some complaints on social media, but the overall number of complaints was very small compared to the total number of loans extended to the clients.

Meanwhile, an official of Sarmaya said they had fired 250 agents out of a total strength of 2,500 over repeated misconduct and complaints of aggressive behaviour towards clients.

However, the SECP chairman said that the solution to the default mindset was to inform the customers that non-payment would lead to their blacklisting in all financial systems and that this awareness campaign had to be imparted in Urdu.

“Regulatory intervention is also needed and the companies have to ensure full disclosure and fair business practices,” Mr Khan told the meeting.

“We want you to maintain a record of all calls and the complaints related to coercive collection practices will be inquired into through the call recordings,” he added.

The SECP advised these NBFCs to adopt best lending practices but make some amendments based on local requirements.

The international practice was to declare any non-performing nano loan as a “bad loan” after 21 days. However, it was decided that this period would be extended to 30 days in Pakistan as the salary period was on a monthly basis in the country compared to a weekly basis in many western countries.

The lenders were informed that SECP does not want to stifle this nascent industry with excessive regulatory burden but would expect the industry to itself practice caution and develop standards that protect borrowers through adequate disclosure.

On the other hand, representatives of NBFCs highlighted that their concerns were mostly related to the existence of a large number of unregulated entities operating in the digital lending sector.

The SECP chairman agreed that official complaints would be lodged to the Pakistan Telecom Authority and the Federal Investigation Agency against illegal lending platforms.

Published in Dawn, July 9th, 2022