Loan Sharks: Lending App Operators Decry Loss of Business Due to FG, Google Regulations

Loan Sharks: Lending App Operators Decry Loss of Business Due to FG, Google Regulations

  • Loan app operators in Nigeria are currently lamenting the potential loss of their business due to new regulations by the Federal Government
  • The FG also compelled Google to withdraw all unlicensed loan apps from their applications store, Google Play Store
  • The operators now fear that with the new regulations, their debtors may never pay back the loans they owe

Hundreds of loan app operators are in crisis following the Federal Government (FG)'s refusal to include them in the recent list of operators licensed and approved to operate in Nigeria.

A few weeks ago, the FG, through the Federal Competition and Consumer Protection Commission (FCCPC), announced that 173 digital lending applications had been approved to operate in the country.

Of the 173 listed loan apps, only 119 have total approvals, while the other 54 currently have conditional approvals.

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Loan app operators decry FG, Google regulations
Man counting cash; lady looking at her phone; online app advert. Photo credit - WithinNigeria, Black Enterprise, MoneyMart
Source: UGC

Following the new development, the other loan apps considered unlicensed by the FCCPC are now considered illegal. They are not allowed to legitimately operate in Nigeria unless they meet the approval process in the future.

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This, therefore, leaves the operators in a state of confusion as many of them have loan defaulters who are yet to pay back and may not bother repaying their loans due to the regulation of the lending sector.

The rise of loan apps in Nigeria

Online lending platforms in Nigeria have existed for over a decade. However, their activities became more pronounced in the last six years when they appeared everywhere, online and in Android and iOS stores.

The rising cost of living in Nigeria has further pushed the demand for soft loans, which on the adverse, come with short repayment periods and high-interest rates.

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Chuka Nnwadike, a Lagos-based banker, told that Nigeria's patronage of loan apps, rather than the traditional banks, is predicated on the swiftness by which the loans are granted, in most cases, without the demand for collateral.

He said:

Data shows that most Nigerians are poor. Some people need loans as little as N5,000 to get by. A bank will not give you N5,000 loan without requesting collateral and having you sign different documents. There's even no telling if the loan request can be granted swiftly. But with loan apps, loans are granted and received almost immediately.

Many Nigerians have come to depend on these loan apps, and there's often no clear-cut way for borrowers to discern the legitimate from the illegitimate. Most borrowers do not care if regulated or unregulated; they are more interested in a platform that can loan them money when needed.

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Nigerian loan apps' illegal activities draw FG's attention

The need for the Federal Government to regulate online lending became necessary when loan defaulters were being harassed by loan apps that began to act like loan sharks.

According to findings, some loan apps violated the ethics of money lending and customers' privacy while attempting to recover loans. Some went as far as threatening loan defaulters and sending defamatory messages to all their contacts.

It is also alleged that some loan apps used the lending business as a cover for money laundering activities on behalf of foreign companies.

To check some of the unwholesome practices, crack down on predatory lending apps in the country and sanitise the micro-lending space, the FCCPC enforced the mandatory registration of all Digital Money Lenders (DMLs) in Nigeria.

"Too many illegalities and ethical practices were ongoing in the online money lending industry. Blackmail and public harassment became measures adopted by these loan sharks to recover loans. It was becoming embarrassing and chaotic and only right at the time for the government to get involved," Abiola Odutola, a business analyst, told

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In the short term, the registration will distinguish between legitimate loan apps and illegitimate ones, some of which have taken up the status of loan sharks.

What's the fate of unlicensed loan apps?

Worried by the current situation, some unlicensed loan apps regret that they may never be able to recover their loans from defaulters. They are even more concerned that Google may soon take them off its Play Store, following the directive of Nigeria's government.

Last year, the FCCPC called on Google and Apple Inc. to enforce the withdrawal of specific money-lending applications from their stores.

Speaking with, Uche Oweh, a senior staff of CreditU, a Lagos-based lending platform, expressed his dissatisfaction with the decision.

He said:

Just because we could not meet the registration deadline doesn't make the operations of some of us illegal. At CreditU, our records are clean, and we have a right to be on app stores. Being taken off these app stores may put us out of business.

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Also speaking on the matter, Temidire Ogunbanwo, the Operations Manager of Cashfit, one of the loan apps that could not meet the approval process before the deadline, shared some of his concerns.

He said:

We have many customers that are yet to complete the repayment of their loans. Some of them have dragged their loan repayment for over a year. Not getting approval to legitimately operate and the threat of being taken off app store puts us at helpless position.
Loan defaulters may take this to mean that we have no legality to demand repayment of loans and may decide to never repay their debt. If this happens, we stand to lose all the money we have hanging outside. This may even signal a possible end of the business in which we have invested a lot.

Last year, the FCCPC called online money lenders nationwide to register for legitimacy. The registration process involved the applicants providing identification and operational information to the FCCPC.

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The FCCPC hoped that with the process, prospective applicants could prove their legitimacy, comply with applicable regulatory requirements, show lawful sources of funds and conformity with anti-money laundering requirements.

However, some of the applicants could not meet up with the deadline, which the FCCPC had shifted several times.

Lateef Adebanjo, the founder of Inglewood Limited and operator of MoneyRain, told that the process has not been as seamless as expected.

He said:

I understand the need to create some form of sanity in the system by separating real loan apps from loan sharks. But the FCCPC has not made the registration process seamless. Some of the requirements are not easy to reach. Hence, some of us could not meet the March 27 deadline.

An official of the FCCPC, who only agreed to speak anonymously, said even though the commission had shifted the deadline for registration no less than three times, some of the operators could not provide all relevant documentation to complete their registration process.

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In a previous report, Ngozi Dozie, the co-founder of Carbon, one of the licensed digital lenders in Nigeria, lamented how denying loan apps access to customers' contacts and photos would negatively affect business.

According to Dozie, even though the policy was well intended, the policy puts fintech startups at a disadvantage to the benefit of big banks.

He said:

There is a grave danger that what started as a positive action will stifle innovation and hurt the smaller companies that are doing God’s work in financial inclusion. What’s worse is that there is already an uneven playing field between the fintech Davids and the Big Bank Goliaths.

Nigeria is not the only country dealing with illegal online lending platforms, otherwise known as loan sharks.

According to the Times of India, India has the highest number of such apps and has already begun a crackdown on their illegal activities.

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While we may not rule out that many Nigerians have formed the habit of taking loans from these platforms without an intention to pay them back, it is also essential for the government to ensure there are regulations that would protect genuine borrowers from predatory lending platforms.

The legitimacy given to some loan apps and lending platforms by the government is set to go a long way in regulating the lending ecosystem by ensuring accountability and transparency on the part of the loan apps. In addition, the risks involved in the patronage of loan apps will be reduced as the government will also be able to monitor their activities and apply sanctions when and where necessary.


Victor Enengedi avatar

Victor Enengedi (Business HOD) Victor Enengedi is a trained journalist with over a decade of experience in both print and online media platforms. He holds a degree in History and Diplomatic Studies from Olabisi Onabanjo University, Ogun State. An AFP-certified journalist, he functions as the Head of the Business Desk at Legit. He has also worked as Head of Editorial Operations at Nairametrics. He can be reached via and +2348063274521.

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