FG goes after loan sharks, granting the wish of stakeholders in the tech space

Opportunism is no news in Nigeria, and it is not always bad. But, when it becomes a weapon to ‘play with’ concepts like poverty, or financial incapacity, therein lies the problem. Loan platforms usually present themselves as the ones who understand the financial needs of the average Nigerian, and for that, Nigerians have come to love them. Still, their entry into the tech space has come with too many bad stories.

The complaints have come mostly from Nigerians who possibly do not even use the platforms, but the reign of that system may have come to a screeching halt.

In a sweeping move to clip the wings of the loan sharks, federal government officials from the Federal Competition and Consumer Protection Commission (FCCPC), National Information and Technology Development Agency (NITDA), and the Independent Corrupt Practices and Related Offences Commission (ICPC) last week raided the offices of loan platforms in Ikeja, freezing their accounts and shutting them down.

The message was clear; Enough is enough!

Government officials said that they had been investigating the practices of these companies since 2020. For years, they have been the focus of opinion pieces and reports of gross unprofessional ethics in the Nigerian tech media eco-space.

The rise of the loan apps

At the height of the pandemic in 2020, when the lockdown was initiated, many – who live on daily bread, literally – desperately needed the money. They needed to stock their homes with food and other amenities. The succour palliatives made available got to as many people as the word few, so most other Nigerians had to look elsewhere.

When the loan sharks started sending messages that everyone was eligible for 10,000 here, 30,000 there, without collateral and with ridiculous interest percentages, in a country with an unemployment rate of 33.3%, the second-highest on the global ranking, they (loan apps) seemed like the next best thing.

But, as they glossed over the terms and conditions of these loan apps, they left out a vital clause; You hereby waive any right of confidentiality whether arising under common law or statute or in any other manner whatsoever and irrevocably agree that You shall not argue to the contrary before any court of law, tribunal, administrative authority or any other body acting in any judicial or quasi-judicial capacity.

The loan apps weaponised this clause and made the lives of these Nigerians a living hell when they defaulted on payment days. They could send broadcast messages to their contacts with their photographs calling them “criminals” and “chronic debtors.” They could threaten their livelihoods with lawyers. They have harassed and belittled users of their platforms in public digital spaces.

The feds’ investigation

Shortly after Soko Loans was fined ₦10 million for invasion of privacy and compromising the digital economy, in 2021, the federal government said that it had started investigating the activities of these apps.

The Chief Executive Officer of the Federal Competition and Consumer Protection Commission (FCCPC), Babatunde Irukera, on behalf of the Joint Regulatory and Enforcement Committee announced this plan in a document at the time.

‘’The Federal Competition and Consumer Protection Commission on November 10, 2021, hosted a meeting attended by the Chief Executive Officer of the Independent Corrupt Practices Commission (ICPC) and representatives of the National Information Technology Development Agency (NITDA) and the Central Bank of Nigeria (CBN); in leading an effort to address the multiple potentially dubious conduct of certain money lenders, otherwise known as loan sharks,” the statement read.

The Chief Executive Officer, FCCPC, Babatunde Irukera said last week that, from the investigation, they found out that the companies are mainly operating from a single location in Opebi, Ikeja, Lagos.

“We found out that most of these companies operate from the same place. We also found out that many of them are operated by the same person. They are not Nigerian companies, they don’t have an address in Nigeria and they are not registered in Nigeria with the Corporate Affairs Commission in Nigeria. They have no licence to do business here.

“This information started quite a while ago. Some time ago, when the country was on lockdown in 2020 due to the pandemic, we started seeing the rise in money lenders…But over a period of time, people started complaining about the malpractices of the lenders, so we started tracking it” he said.

“Towards the end of last year, we gathered quite a lot of information. We started working with some other key agencies and the FCCPC led the meeting where we all agreed there would be a joint effort to look into these businesses.”

For Irukera, the last straw was “the naming and shaming, violation of people’s privacy concerning how these lenders recover their loans,” and the interest rates, which “seems to be a violation of the ethics on how lending is done.”

With enough evidence and a solid case they got a warrant from a court and stormed the offices of these companies including; GoCash, Okash, EasyCredit, Easi Moni, KaGoCash, Okash, EasyCredit, Kashkash, Speedy Choice, Easy Moni.

Irukera said that they have sent messages to app stores to kick them off their stores.

What does this mean for fintech in Nigeria?

With this move, it seems like the prayers of many in the Nigerian tech space who have been greatly affected by the proliferation of the apps has been finally answered. For years, many licenced companies have called for the government to create more restrictions and regulations about who and how one can set up a tech company, especially a fintech company.

Just last week, the founder of savings platform CashBox, Sydney Aigbogun, said that more regulations are needed by the bodies in charge in the space. The activities of these loan apps have been a stain to other apps in the space that don’t operate in these patterns. They have decried a need to separate the wheat from the chaff from the space. At the Lagos Tech Fest last week, during a panel, regulations for fintech was the focal point amongst panellists.

The feds have taken a step, and it is an exciting leap away from what loan sharks would have continued to subject Nigerians to.