Rogue Chinese Loan Apps Adding to Misery of Local Population in Pakistan

As Pakistan’s economy is in tatters, households are finding it hard even to manage their routine expenditures. Some of the Pak households have seen steep decline in their incomes while many of them have seen their family members losing their employment.

The economic misery of the Pakistani population has been exacerbated by loans offered by the digital Apps, which are taking advantage of the desperation of the local population who are looking for short-term finance.

Facing galloping inflation along with high unemployment and stagnant incomes, more and more Pakistanis are turning to rogue loan apps like WeCash, apparently based in or originating from China, to meet even their day to day needs like paying their electricity bills.

Pakistan has become a fertile ground for these rogue foreign loan apps, especially from China, as it is facing an acute financial crisis while its digital finance regulations are poor and lax. These apps, while providing easy credit with high interest rates ranging anywhere between 18-50% per month, threaten the borrower to pay up, eventually leading the borrower into a debt trap.

The ongoing forex crisis has badly hit the economy and eroded living standards in Pakistan. This has increased poverty as the economic crisis reduced the incomes of already poor households. To maintain the basic level of living, the population gets attracted to these unscrupulous digital lending apps and end up paying a heavy price in terms of very high interest rates or facing social media shaming.

While a large number of factories are laying off partially or completely closed, millions of people have lost their jobs during the economic meltdown. Since many households and businesses are failing to repay their loans to banks, they are turning to loan apps for financial help. The number of Pakistanis using personal finance apps more than doubled to 19% in 2022 from two years earlier.

Many of these apps, which are nothing but scammers, offer Pakistanis easy loans in exchange for access to their person’s phone data, including their photo gallery and contact list. With the unprecedented economic misery, the local population is facing, they easily fall prey to the promises of these digital loan apps. The loan apps are also cashing in on the cumbersome process and bureaucratic hurdles involved in getting a bank loan in Pakistan which is also with high interest rates.

Acute economic hardships of the people can be attributed to a very high rate of inflation of over 38%, lack of food & fuel, and host of other economic misery.

With the large increases in gas and electricity bills, the prices of daily necessities have also gone beyond the reach of the common man. Surging inflation and health care prices has forced many families to seek financial help from these non-conventional sources. Poor citizens become prey to these rogue loan apps.

A growing number of illicit digital lending apps exploiting consumers have been reported in Pakistan. The Security and Exchange Commission of Pakistan (SECP) has so far identified 75 online lending applications as scams. According to the SECP, these illegal apps have a ‘predatory lending’ behavior, where they
blackmail and harass borrowers and breach their data privacy.

According to the SECP, numerous domestic and international companies were involved in the digital loan racket. Companies under investigation include Flexi Money, Hazir Loan, Credist, Fori Money, Fast Cash, Mr Loan, V Cash and Mera Rupee. Most of them are foreign companies with frontmen in Pakistan. They have fake addresses and use the SECP’s name illegally. As in the case of most of the South Asian and Southeast Asian countries, they could be linked to Chinese companies. The Facebook page of WeCash has three admins, all of whom are based in China.Islamabad is facing a tough macro-economic crisis. According to the World Bank, a difficult macroeconomic environment, a deteriorating labour market, lower remittances, quickly rising prices, and the impact of recent natural disasters have led to a decline in household incomes and high poverty rates.

As of 2023, Pakistan’s poverty ratio is expected to reach 37.2%.

According to Moody’s, a significant share of revenue going towards interest payments will increasingly constrain Pak government’s capacity to service its debt while also meeting the population’s essential social spending needs.

The rapidly deteriorating economic situation is becoming fertile ground for these rogue app-based loan scammers in Pakistan.