Loan Apps: Necessary Evil, Doing Far More Harm Than Good

For some time now, loan apps (also known as loan sharks) have continued to wreak havoc amongst unwary and unsuspecting Nigerians who cave into financial pressures and take their loans.

Their deliberately stealth and 'harmless' mode of operation includes presenting an appeal of immediately solving your cash challenges with little or no hassle. 

At the point of filling in details in the app to access the loan, you part with details like bank BVN and phone number.

The app is embedded with a hidden algorithm that can access all of your phone contacts within your network at short notice.

If for any reason, you default in paying back this loan, the operators are able to quickly reach everyone within your network to exacerbate pressures upon you to repay back soonest. 

The Nigeria Data Protection Bureau has stated that a national committee made up of federal agencies,  was working to curb the activities of illegal loan apps in the country. 

According to the National Commissioner/Chief Executive Officer of the bureau, Dr Vincent Olatunji, these firms have caused a lot of pain to Nigerians.

During a recent press briefing in Lagos, he stated that one agency cannot do the work alone, hence the collaboration among agencies. 

“One good thing that is happening is that it is not limited to the bureau alone.

"There are so many government organizations involved now.

“We have a national committee working on this.

"We have the Federal Competition and Consumer Protection Commission for consumer protection.

"We have the National Information Technology Development Agency, which is about the technology they are using to access the contacts of their customers.

“We have the Nigerian Communications Commission, which is about the platform.

"We have the Independent Corrupt Practices Commission and the Economic and Financial Crimes Commission for financial crimes.

"We have the police, which is about investigating crimes. We have the Central Bank of Nigeria which is ideally the body regulating the financial sector", he said.

Olatunji noted that many of the loan apps have licenses issued by the various states where they operate and do not have steady offices to hide their identity. 

“One common thing with them is that they do not have physical offices.

"When they are here today, they move to another one tomorrow and repeat the cycle because they are hiding their identity.”

He further stated that the bureau was in the process of creating a collaborative guideline that would regulate and sanitize the sector. 

He explained that while the bureau got reports of the activities of many of these apps, it is difficult to investigate because the firms do not have offices. 

“We are really coming out to ensure that we track them down and save a lot of Nigerians from these organizations.

“But one thing that we need to also note as part of the awareness is the fact that some of these activities are written in their privacy policies, but a lot of people do not read them because they want access to quick money.

"Some even state that when one defaults, they would get access to their contacts.

“A lot of people in this category are illiterates and what is important to them is the money, but we are working on it with all the organizations coming together. We are addressing it.”

Lessons and Conclusions

Loan apps have grown in prominence in the country because of how tough it is to get a bank loan.

Many Nigerians have had to turn to these apps to quickly access credit.

But with high-interest rates and short turnover periods, many borrowers have defaulted, and these apps are famed for their crude means, including sending messages to the borrower’s phone contacts and defaming their borrowers, of recovering their loans.

However, the growth of loan apps can only be attributable to the level of impoverishment of the citizenry.

Where there is employment and the GDP is high and the inflationary rate is low, there will never be any space for the loan app operators.

This is a clarion call for the government at all levels to rise to the ocassion.