Pakistan continues crackdown against loan apps accused of ‘citizen exploitation’

The undated photo shows the screen of a smart phone displaying various applications. (Reuters)
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Updated 20 July 2023
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Pakistan continues crackdown against loan apps accused of ‘citizen exploitation’

  • Securities and Exchange Commission had by May received 1,415 complaints against licensed digital lenders, 181 against unlicensed ones
  • Fraudsters have found fertile ground for scams in Pakistan as more people turn to digital lenders amid record inflation

ISLAMABAD: Salman Sufi, the head of the Pakistani prime minister’s strategic reforms unit, said on Thursday authorities such as the Federal Investigation Agency, the Securities and Exchange Commission of Pakistan and the Pakistan Telecommunications Authority were continuing their crackdown against loan apps involved in extorting money through threats and blackmail.

Loan apps have been in the headlines in Pakistan after the death by suicide of a 40-year-old man from Rawalpindi who was unable to return funds he borrowed from mobile apps. His wife told police loan officers from the apps had been threatening him on a daily basis, compelling him to take his own life.

On Monday, Pakistan’s telecommunication regulator said it had blocked 43 rogue loan apps.

“The list of loan shark Apps that were identified by SECP and Blocked by @PTAofficialpk,” Sufi wrote on Twitter on Thursday.

“FIA SECP PTA continue to identify further apps which are built for the sole purpose of citizen exploitation and will continue to block- prosecute.”

The tragic episode of the suicide comes as annual inflation rose to 37.97 percent in May, setting a national record for the second month in a row and adding to Pakistan’s problems of a balance of payment crisis and the risk of a sovereign default. Most people in the nation of 220 million are struggling to cope with a surge in living costs triggered by the government’s devaluing the currency and removing subsidies to pave the way for an International Monetary Fund (IMF) bailout needed to stave off economic collapse.

Against this background, more and more people are turning to mobile-based lenders, creating fertile ground for scams and fraudsters, digital rights and consumer defense groups say.

Many of the apps are regulated, but they too are the source of hundreds of complaints filed so far this year with the country’s capital market regulator, the Securities and Exchange Commission of Pakistan.

Reflecting a jump in smartphone use, the number of Pakistanis using personal finance apps more than doubled to 19 percent in 2022 from two years earlier, boosting low rates of financial inclusion, according to a survey earlier this year by Karandaaz Pakistan, a nonprofit.

But while the apps offer quick, collateral-free credit to the largely unbanked, the boom has led to a surge in complaints about illegal lenders that routinely abuse customers’ data and use aggressive recovery tactics including threats and blackmail.

The country’s capital market regulator, the Securities and Exchange Commission of Pakistan, had by May received 1,415 such complaints against licensed digital lenders and 181 against unlicensed ones, and federal police are investigating apps involved in blackmailing clients.

“It is necessary to bring to justice the elements that take advantage of the compulsions of the people and push them into the darkness of death,” IT Minister Aminul Haque said in a statement this week.


Pakistan’s military chief Asim Munir in spotlight over Trump’s Gaza plan

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Pakistan’s military chief Asim Munir in spotlight over Trump’s Gaza plan

  • Sources say Munir is expected to visit Washington in the coming weeks for talks with the US president on Gaza
  • Any Pakistani troop role in Gaza could trigger backlash from pro-Palestine, anti-US groups at home, analysts say

ISLAMABAD: Pakistan’s most powerful military chief in decades faces the toughest test of his newly amassed powers as Washington pushes Islamabad to contribute troops to the Gaza stabilization force, a move analysts say could spark domestic backlash.

Field Marshal Asim Munir is expected to fly to Washington to meet President Donald Trump in the coming weeks for a third meeting in six months that will likely focus on the Gaza force, two sources told Reuters, one of them a key player in the general’s economic diplomacy.

Trump’s 20-point Gaza plan calls for a force from Muslim nations to oversee a transition period for reconstruction and economic recovery in the war-torn Palestinian territory, decimated by over two years of Israeli military bombardment.

Many countries are wary of the mission to demilitarize Hamas in Gaza, which could drag them into the conflict and enrage their pro-Palestinian and anti-Israeli populations.

But Munir has built a close relationship with the mercurial Trump to repair years of mistrust between Washington and Islamabad. In June, he was rewarded with a White House lunch — the first time a US president hosted Pakistan’s army chief alone, without civilian officials.

“Not contributing (to the Gaza stabilization force) could annoy Trump, which is no small matter for a Pakistani state that appears quite keen to remain in his good graces — in great part to secure US investment and security aid,” said Michael Kugelman, Senior Fellow, South Asia at Washington-based Atlantic Council.

‘PRESSURE TO DELIVER’

Pakistan, the world’s only Muslim country with nuclear weapons, has a battle-hardened military having gone to war with arch-rival India three times and a brief conflict this summer. It has also tackled insurgencies in its far-flung regions and is currently embroiled in a bruising war with militants who it says are operating from Afghanistan.

Pakistan’s military strength means “there is a greater pressure on Munir to deliver his capacity,” said author and defense analyst Ayesha Siddiqa.

Pakistan’s military, foreign office and information ministry did not respond to questions from Reuters. The White House also did not respond to a request for a comment.

Pakistani Foreign Minister Ishaq Dar said last month that Islamabad could consider contributing troops for peacekeeping but disarming Hamas “is not our job.”

UNPRECEDENTED POWER

Munir was earlier this month anointed chief of the defense forces to head the air force and navy as well, with a job extension until 2030.

He will retain his field marshal title forever, as well as enjoy lifetime immunity from any criminal prosecution under the constitutional amendments that Pakistan’s civilian government pushed through parliament late last month.

“Few people in Pakistan enjoy the luxury of being able to take risks more than Munir. He has unbridled power, now constitutionally protected,” Kugelman added.

“Ultimately, it will be Munir’s rules, and his rules only.”

THE HOME FRONT RISK

Over the past few weeks, Munir has met military and civilian leaders from countries such as Indonesia, Malaysia, Saudi Arabia, Turkiye, Jordan, Egypt and Qatar, according to the military’s statements, which Siddiqa said appeared to be consultations on the Gaza force.

But the big concern at home is that the involvement of Pakistan troops in Gaza under a US-backed plan could re-ignite protests from Pakistan’s religio-political parties that are deeply opposed to the US and Israel.

These parties have street power to mobilize thousands. A powerful and violent anti-Israel party that fights for upholding Pakistan’s ultra-strict blasphemy laws was banned in October.

Authorities arrested its leaders and over 1,500 supporters and seized its assets and bank accounts in an ongoing crackdown, officials said.

While Islamabad has outlawed the group, its ideology is still alive.

The party of former jailed premier, Imran Khan, whose supporters won the most seats in the 2024 national elections and has wide public support, also has an axe to grind against Munir.

Abdul Basit, Senior Associate Fellow, S. Rajaratnam School of International Studies in Singapore, said if things escalated once the Gaza force was on the ground, it would cause problems quickly.

“People will say ‘Asim Munir is doing Israel’s bidding’ — it will be foolhardy of anyone not to see it coming.”