Lessons From the Regulatory Response in Indonesia, India and the Philippines
Posted: Thu Feb 13, 2025 3:53 am
Over the past two years, customer complaints about digital lending apps have been surging across several emerging markets, raising serious concerns about predatory digital lending. Indonesia, India and the Philippines are among the countries that are contending with these complaints, which first came to the attention of watchdogs and government agencies between 2018 and 2020.
The complaints are largely focused on two phases of the digital lending process: marketing and repayments. Digital lending platforms and mobile apps are often seen to be using misleading marketing practices, like promising loans within minutes with inadequate disclosure of pricing, terms and conditions. Their loan application requirements include permission to use the borrower’s phone contacts, camera and social media accounts as a pre-condition for loan processing. In cases of client default, this can lead to harassment tactics which may involve shaming clients by sending frequent defaming messages to their relatives and other personal korea whatsapp number data contacts or using social media to post abusive threats.
Developing an appropriate regulatory response to these issues is a challenge. While digitization contributes to greater financial inclusion, it also produces new risks for clients — yet the diversity of fintech models and innovations has made it more complex for regulators to respond to these risks. Meanwhile, the need for a clear regulatory response has only increased during the pandemic year, as economic stress, combined with reticence about face-to-face contact, has likely driven more people to use these apps.
Based on my review of media reports, published articles and regulatory circulars, this article presents some of the common regulatory responses to predatory lending apps across Indonesia, India and the Philippines, along with some thoughts about how these responses can be most effective.
Regulatory Responses to Predatory Lending Apps
Regulators have used four main tactical responses to combat problems with predatory lending in these three countries.
Cautioning the Public: Regulators have issued public caution notices through media channels. This was seen in India, when the Reserve Bank of India (RBI) warned people against sharing their Know Your Customer documents with finance apps that don’t clearly identify the company behind them. It cautioned the public to check for the names of the financial service providers backing digital platforms and to confirm on the RBI website that they are registered with the RBI or state/federal governments. It also urged people to report unauthorized apps to law enforcement agencies through the RBI’s Sachet Portal, an online complaints website.
The complaints are largely focused on two phases of the digital lending process: marketing and repayments. Digital lending platforms and mobile apps are often seen to be using misleading marketing practices, like promising loans within minutes with inadequate disclosure of pricing, terms and conditions. Their loan application requirements include permission to use the borrower’s phone contacts, camera and social media accounts as a pre-condition for loan processing. In cases of client default, this can lead to harassment tactics which may involve shaming clients by sending frequent defaming messages to their relatives and other personal korea whatsapp number data contacts or using social media to post abusive threats.
Developing an appropriate regulatory response to these issues is a challenge. While digitization contributes to greater financial inclusion, it also produces new risks for clients — yet the diversity of fintech models and innovations has made it more complex for regulators to respond to these risks. Meanwhile, the need for a clear regulatory response has only increased during the pandemic year, as economic stress, combined with reticence about face-to-face contact, has likely driven more people to use these apps.
Based on my review of media reports, published articles and regulatory circulars, this article presents some of the common regulatory responses to predatory lending apps across Indonesia, India and the Philippines, along with some thoughts about how these responses can be most effective.
Regulatory Responses to Predatory Lending Apps
Regulators have used four main tactical responses to combat problems with predatory lending in these three countries.
Cautioning the Public: Regulators have issued public caution notices through media channels. This was seen in India, when the Reserve Bank of India (RBI) warned people against sharing their Know Your Customer documents with finance apps that don’t clearly identify the company behind them. It cautioned the public to check for the names of the financial service providers backing digital platforms and to confirm on the RBI website that they are registered with the RBI or state/federal governments. It also urged people to report unauthorized apps to law enforcement agencies through the RBI’s Sachet Portal, an online complaints website.