One such local was 55-year-old Muhammad Ijaz, who had applied for a small loan of Rs15,000 through a loan application and ended up with severe mental trauma. “I took a loan for one month on the basis of my identity card number and two personal guarantors. After taking the loan, the company made my life miserable. When I was unable to pay off the loan on the due date, the loan lenders started harassing me. At first, they started charging Rs500 extra on a daily basis, and later they started threatening my guarantors. Soon after, they sent their teams to my house, terrorizing me to pay off the loan immediately,” revealed Ijaz, who ended up paying double the original loan amount, over Rs30,000 due to hidden charges.
Another debtor, Adnan shared a similar story. Adnan had borrowed a loan amounting to Rs20,000 to pay off an unusually high electricity bill. Before the due date, he started receiving threatening calls that warned him of penalties in case of a delay in payment. “I paid back the loan with heavy interest since I feared further threats and potential visits from the loan lenders,” revealed Adnan, who could not even report the App since police officers were allegedly complicit and were aiding the fraudsters in their recovery efforts.
According to sources of the Express Tribune, these illegal loan applications mainly target people in need of urgent cash and are operated by companies based within and outside Pakistan, that use social media platforms like Facebook and Instagram to lure in desperate debtors. These companies are neither registered with the State Bank of Pakistan nor with the Securities and Exchange Commission of Pakistan (SECP) hence they easily trap unsuspecting users by offering quick, easy loans, typically between Rs100,000 to Rs200,000 with repayment periods as short as a few days to a month.
Such illegal online loan dealings continue secretly across the country, with a growing number of people falling victim to these exploitative practices. The loan lenders thrive on collecting exorbitant penalties and interests, exploiting the lack of awareness among the public. Furthermore, since access to small personal loans through banks remains extremely difficult, more and more people risk falling prey to these menacing applications.
Addressing the problem, SECP’s Director of Communications, Affan Haider, stated that the SECP was actively cracking down against all illegal loan apps, many of which have already been shut down, especially those registered within Pakistan. “For apps operating from abroad, SECP is working with Google and the Pakistan Telecommunication Authority (PTA) to remove them from the Google Play Store and Apple App Store.
Any lending app must obtain an NBFC (Non-Banking Financial Company) license, and those operating without it will face legal action. Moreover, the Federal Investigation Agency (FIA) is also taking action against these fraudulent companies. As part of consumer protection efforts, the SECP, in collaboration with Google and PTA, has successfully removed 120 illegal loan apps from app stores. We encourage the public to report such applications so that action can be taken swiftly,” said Haider.