Country-specific licensing documentation a must: Google tightens the noose around loan apps’ operators

ISLAMABAD: Google has introduced additional requirements for digital lending apps in Pakistan by directing personal loan apps to submit country-specific licensing documentation required by the Securities and Exchange Commission of Pakistan (SECP).

The SECP officials told Business Recorder here on Monday that Google in its April 2023 policy update have restricted personal loan apps targeting users in Pakistan from accessing user contacts or photos.

Moreover, Google has now made it mandatory for personal loan apps in Pakistan to submit country-specific licensing documentation to prove their ability to provide or facilitate personal loans.

Apart from policy formulation, SECP’s initiatives comprise enforcement actions and consultations/engagements with pertinent stakeholders such as Google-Asia Pacific, Apple, mobile wallet operators and Telecom Service Providers.

These endeavors are intended to safeguard the interests of consumers and ensure that all digital lending platforms comply with the prescribed regulatory requirements, officials said.

Unapproved digital lending apps/platforms: SECP stops NBFCs from collaborating

After India, Indonesia, the Philippines, Nigeria and Kenya, Pakistan is the 6th country in the world for which Google has introduced additional requirements for digital lending apps.

Firstly, each NBFC can only publish one digital lending app. Developers who attempt to publish more than one app per non-banking finance company (NBFC) risk the termination of their developer account and any other associated accounts.

Secondly, the digital lending Apps should complete the Personal loan app declaration for Pakistan and provide the necessary documentation.

They must submit proof of approval from the SECP to offer or facilitate digital lending services in Pakistan. The digital lending Apps should also provide additional information or documents relating to compliance with the applicable regulatory and licensing requirements.

Officials further explained that the SECP has identified several instances involving the use of e-wallet accounts and API integration facilities of various banks/EMIs by unlicensed digital lending apps.

To address this issue, SECP is working closely with the State Bank of Pakistan to formulate a policy that will prevent unlicensed or illegal digital lending apps from using banking channels.

The SECP has engaged in discussions with the major market players in e-wallet accounts, which hold almost 90% of the branchless banking market share in Pakistan, to address the issue of unlicensed digital lending apps/platforms/entities utilizing their banking services.

The collaborative mechanisms have been developed with these banks for reporting such instances and taking appropriate action against unlicensed apps, including blocking the accounts/IDs that are identified as engaging in illegal lending or deposit-taking, officials stated.

In 2022, within the confines of Pakistan, licensed Non-Banking Financial Companies (NBFCs) disbursed loans exceeding Rs. 74 billion to more than 4.5 million individuals through digital lending applications. Nevertheless, as with any developing technology, associated challenges and risks follow.

Recently, a growing number of illicit digital lending applications and platforms have been reported in Pakistan, leading to consequential harm to consumers, they added.

Copyright Business Recorder, 2023