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ISLAMABAD: Google has agreed to ban all non-licensed digital lending apps in Pakistan, most of which were operating out of the country, and the ‘white list’ of licensed entities will be provide by the SECP to Google at the end of March 2023.

The cut-off date for the digital lending firms to update their apps is March 27 and the final list will be prepared after that.

While digital lending is a growing trend in the country that allows obtaining of short loans without any collateral but the sector was heavily dominated by the non-licensed entities

SECP Executive Director Khalida Habib, here on Tuesday highlighted that a circular has been issued by the Commission that explains the digital lending standards applicable on Non-Banking Finance Companies (NBFCs) undertaking lending activities through digital channels/ mobile applications (Apps).

She was speaking at a financial reporting workshop on Non-Banking Microfinance (NBMF) sector, in light of new regulatory requirements outlined under Circular 15.

She added that the lending standards have been issued by the SECP to tackle concerns involving mis-selling, breach of data privacy, and coercive recovery practices of licensed digital lending companies.

She added that the Commission has taken up the matter with all relevant regulatory authorities including the PTA, FIA, NTISB and SBP, as well as, with Google and Apple for the removal of unauthorised apps.

“After negotiations with Google liaison office in Pakistan 58 unauthorised digital lending apps were removed in January 2023,” Habib added

She informed that through Circular 15, SECP has stipulated minimum mandatory disclosures for the digital lenders before loan disbursement to the borrower.

These include, loan amount approved, annual percentage rates, tenor of loan, instalments /lump sum payment amounts with date(s), and all fee and charges, as well as Key Fact Statement (KFS).

To discourage non-licensed digital lenders, the licensed digital lender shall be required to disclose its full corporate name and licensing status on its lending platform(s)/App(s), and ensure that any advertisement and publication shall be fair and not contain misleading information, she said, adding that SECP has also specified a comprehensive grievance redressal mechanism over and above the current NBFC grievance redressal framework.

Circular 15 also mandates that the digital lenders will not be allowed to access borrowers’ phone book or contacts list or photo gallery, even if the borrower has given consent in this regard.

From January 2022 to November 2022, NBFCs undertaking digital lending disbursed 2,402,301 loans of Rs63.58 billion, to 2.4 million borrowers in 3,738,719 loans.

This results in an average loan size of Rs17,000.

SECP Executive Director and Spokesperson Musarat Jabeen also gave a presentation elaborating the Commission's overall goals and future outlook, with respect to improving financial inclusion, market development and ease of doing business.

Copyright Business Recorder, 2023

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