Chinese investors, who previously poured billions of rupees into digital lending applications, have ceased their investments in Pakistan. These investors played a significant role in the rapid growth of the Pakistani lending industry in 2022.
While some digital lending apps operated with the approval of the Securities and Exchange Commission of Pakistan (SECP), others functioned illegally due to lax enforcement by the SECP and the State Bank of Pakistan. However, the SECP has since tightened regulations to address these issues.
As of now, the SECP has issued licenses to 104 lending companies, while five licenses have been canceled between 2020 and 2025. Initially, borrowers were able to secure loans of up to Rs. 20,000, despite facing exorbitant interest rates and aggressive recovery tactics from these apps. Reports indicate that over 20 million borrowers accessed loans worth billions of rupees, with more than 15 million downloads of apps from eight major lending companies on the Google Play Store.
The crackdown on both registered and illegal lending apps intensified following the tragic suicide of Muhammad Masood, a Rawalpindi resident, on July 11, 2023. Masood reportedly took his life after being blackmailed by an illegal digital lender. These lenders often gained access to personal information, including family contacts and social media accounts, with the consent of borrowers.
In 2023, the Federal Investigation Agency (FIA) launched a nationwide operation against illegal loan apps, registering 74 cases based on complaints from affected individuals. The agency arrested 17 suspects involved in running illegal online loan schemes across various cities and blocked over three dozen accounts.
Sources added that the FIA gained access to the bank accounts of digital lending companies after taking coercive actions against employees and executives of registered firms. Many of these companies reportedly settled their issues with the FIA, leading to a halt in ongoing inquiries against most digital lending apps. Meanwhile, numerous victims of these lending practices continue to seek justice.
