Digital loan apps are encouraging Nigerians to take on more debt, experts say

  • More Nigerians will be in debt if loan apps continue their lending frenzy and nothing is done to reduce it
  • Experts have predicted that the explosion of these apps will impoverish Nigerians through their method of loan recovery
  • Others say the apps are helping Nigerians meet their immediate needs as banks are unavailable for personal loans

One of the success stories of the fintech revolution in Nigeria is the explosion of digital loan apps or personal loan apps.

Nigerians have never been so spoiled for choice when it comes to personal loans, which provide disposable income to cash-strapped people.

The elderly man watches intently as the middle-aged bank clerk helps him access the mobile banking app on his smartphone. Credit: Image Bank
Source: Getty Images

They are strewn all over the app stores, enticing users to take out one form of loan or another to meet their immediate financial needs.

Owolabi Jaiyeola, a financial expert, says it’s a double-edged sword.

Read also

Hunger virus: Has Buhari really done enough by Isreal Arogbonjo

He says

“While these apps are there to ask users to take out loans, the danger is that they are unauthorized and may exceed the interest rate approved by the Central Bank of Nigeria.”

At last count, more than 20 loan apps are in the Google Play Store.

These apps, in the absence of a well-structured ecosystem, rely on customer phone records to check their creditworthiness.

They do this by sifting through smartphone data, including call logs, contact lists, GPS data and texts, users can look beyond traditional banks to access credit.

But there is just one problem. There is growing evidence that easy access to fast digital loans is driving personal debt growth. And as lending apps jostle for market share and revenue from interest payments, there are concerns that they may inadvertently push users into debt and poor spending choices.

Read also

Shocked by excessive bank charges, Nigerians turn to digital banks and wallets

But, Ifeanyi Ekemeze, one of the operators, says digital lending apps fill huge gaps left open by traditional banks.

Emezie said the loan apps meet real needs. He asked how many times Nigerians have walked into a bank in Nigeria and asked for a loan of N50,000 and got it at the snap of a finger with no collateral.

If you as a parent are unable to raise your wards tuition quickly, loan applications come to your aid quickly rather than waiting for banks with complex bureaucracy and ultimately account, may not even grant you the loan, Ekemezie said.

Sell ​​our data?

Despite repeated assurances from apps that user data is protected, Jaiyeola believes that some of the apps fail to protect user data as they can be hacked by cyber criminals.

Before getting a loan, these apps ask you essential questions like filling in your debit card details, bank verification number (BVN) and other details, which gives them access to your bank statements.

Read also

Over N73 billion accidentally paid into bank customer accounts on Christmas Day

Experts say this trivializes user data and may result in it being used as a medium of exchange by some unscrupulous lenders, as was done by Facebook during the 2015 and 2016 Cambridge Analytica saga in which more than 87 million Facebook user data has been harvested for the purposes of ad targeting and vote buying in US and Nigerian elections.

The commodification of user data raises concerns about privacy and data ownership. The review begins to lead to partial crackdowns. Kenya passed new EU-inspired data protection laws and Nigeria simply ratified its own while Google recently announced it would ban loan apps that promote personal loans, which require a repayment in two months or less.

The spokesman for the Central Bank of Nigeria, Osita Nwanisiobi, did not return calls on his mobile phone or respond to messages sent to him asking whether the CBN was aware of these loan applications and what measures had been put in place to control abuse.

Read also

Find out how to play and win with NaijaBet

But a CBN directive to fintech operators is that they must be duly licensed.

In 2018, the CBN introduced a banking category which it calls Payment Services Bank (PSB).

A PSB is a bank that is authorized to, among other things, accept a deposit, provide payment and funds transfer services and also issue digital wallets. According to the guidelines, a PSB should operate in rural areas.

Additionally, the Nigerian Communications Commission regulates fintech businesses when they involve the use of mobile phones.

Collect our data?

Despite repeated assurances from apps that user data is protected, Jaiyeola believes that some of the apps fail to protect user data as they can be hacked by cyber criminals.

Before getting a loan, these apps ask you essential questions like filling in your debit card details, bank verification number (BVN) and other details, which gives them access to your bank statements.

Experts say this trivializes user data and may result in it being used as a medium of exchange by some unscrupulous lenders, as was done by Facebook during the 2015 and 2016 Cambridge Analytica saga in which more than 87 million Facebook user data has been harvested for the purposes of ad targeting and vote buying in US and Nigerian elections.

Read also

5 ways to win elections in Nigeria

The commodification of user data raises concerns about privacy and data ownership. The review begins to lead to partial crackdowns. Kenya passed new EU-inspired data protection laws and Nigeria simply ratified its own while Google recently announced it would ban loan apps that promote personal loans, which require a repayment in two months or less.

CBN Regulations

The spokesman for the Central Bank of Nigeria, Isaac Okoroafor, did not return calls on his mobile phone or respond to messages sent to him asking whether the CBN is aware of these loan applications and what measures. have been put in place to control abuse.

But a CBN directive to fintech operators is that they must be duly licensed.

In 2018, the CBN introduced a banking category which it calls Payment Services Bank (PSB).

A PSB is a bank that is authorized to, among other things, accept a deposit, provide payment and funds transfer services and also issue digital wallets. According to the guidelines, a PSB should operate in rural areas.

Read also

List of Private Lending Opportunities in Nigeria

Additionally, the Nigerian Communications Commission regulates fintech businesses when they involve the use of mobile phones.

Get a loan faster

Legit.ng reported that one of the main challenges in starting a business is capital. Prospective entrepreneurs are looking for companies that can provide them with an instant loan in Nigeria without collateral. Others might just be looking for a way to get cash before the next paycheck. Whatever the reason, sometimes you just need the money, and fast.

Our aim is to make this search easier for everyone by providing a list of loan applications available in Nigeria. Take a look and find the app that best suits your needs.

Whether you are looking for money to start your own business, buy a car, book a trip, or just have cash on hand, there is definitely a way for you to get an instant loan online in Nigeria.

Source: Legit.ng

Comments are closed.