The landscape of digital lending in Nigeria is undergoing a dramatic transformation, with the number of approved loan app soaring to 380 this February, a significant jump from 320 in October of the previous year. This surge, reflecting approvals from both the Federal Competition and Consumer Protection Commission (FCCPC) and licenses granted by the Central Bank of Nigeria (CBN), signals a burgeoning appetite for accessible financial services. However, this growth is shadowed by a rising tide of consumer apprehension regarding the operational ethics of some digital lenders.
According to the FCCPC’s database, a substantial 322 digital lenders have received full approval, while 42 operate with conditional approval. Additionally, 16 companies are licensed by the CBN, culminating in the 380 approved entities. While this expansion suggests increased financial inclusion, it also raises critical questions about regulatory oversight and consumer protection.
“It is not enough to issue a licence or grant approval based on the fact that they have met certain conditions set by the FCCPC, the regulator needs to monitor these lenders and ensure that they are operating in ethical ways, especially how they disburse loans and how they recover their loans,” stated Mr. Gbolagunte Ajayi, a financial analyst. His words underscore a growing sentiment that regulatory action must extend beyond mere registration to encompass active policing of lending practices.
Consumer Experiences: A Growing Sense of Unease
The concerns voiced by consumers are not merely abstract fears. They reflect real-life experiences, often laden with emotional distress. My chats with a few people regarding the saving capabilities of these loan apps tended to view them as a trap rather than a saviour.
Omowunmi revealed that she obtained a loan from a well-known vendor out of an urgent need. She voiced her displeasure with the time element and interest rate. “I was offered N44,000 to refund N76, ooo over a two-month period,” she said. This ran counter to the advertisement that said I might receive N100,000 and repay N100,400 over three months. Kemi herself expressed dissatisfaction about the unwanted messages and calls she received from the agent urging her to take out a loan in order to obtain a reduced interest rate.
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Daniel bemoaned the automated calls that occur when a loan default occurs. “Do they think I will be forced to pay for all the calls? I receive up to 35 calls every day telling me to pay. When I phoned their centre to report that my device had a problem and I was unable to access my account to make a payment, the representative asked me to borrow a device, log into my account, and make the payment. She then provided her account information to complete the payment, but regrettably, it was unsuccessful. When the loan was past due, I received forty calls from a machine.”
These narratives paint a picture of a sector where the lines between legitimate lending and predatory practices blur. The use of harassment and threats, reminiscent of unregulated “loan sharks,” by some licensed apps further exacerbates consumer anxiety. This raises a critical question: how can regulators ensure that the benefits of digital lending, such as increased financial access, are not overshadowed by unethical practices that exploit vulnerable individuals?
Regulatory Response and Economic Implications
The FCCPC acknowledges the challenges and has taken steps to address them. Adamu Abdulahi, Executive Commissioner of Operations at the FCCPC, emphasised the commission’s efforts to identify and hold loan app operators accountable through its Interim Regulation. He also mentioned that 47 loan apps have been delisted from the Google Play Store, and 88 are under close watch. “The main aim of the registration and approval of digital lenders in the country is to identify the companies behind the apps through its Interim Regulation to be able to hold them responsible for any infraction,” he clarified.
Despite the challenges, the FCCPC recognises the vital role loan apps play in the Nigerian economy. These platforms offer crucial financial services to individuals who may be excluded from traditional banking systems, contributing to financial inclusion. However, a balance must be struck between fostering innovation and safeguarding consumer rights.
The rapid expansion of the digital lending sector necessitates a robust regulatory framework that not only approves lenders but also actively monitors their operations. As we navigate this evolving financial landscape, it is imperative that consumer protection remains at the forefront, ensuring that the promise of accessible finance does not come at the cost of ethical integrity.
