With the rising cost of living in the country, marked by rising prices of goods and services, many Ugandans who own smartphones have fallen prey to numerous moneylending apps promoted on social media platforms.
These apps offer quick loans and are used by most Ugandans to get the funds they need to survive. The Uganda Microfinance Regulatory Authority has said that despite efforts to ensure that most money lending apps operating under its jurisdiction follow set guidelines, X Online LoanApps trending with the hashtag #IllegalOnlineLoanApps The campaign highlights important issues.
The campaign, led by cyber forensics investigator and long-time activist Ronald Egesa, revealed that the ever-increasing number of apps flooding the digital space is taking its toll on many Ugandans. These apps offer loans with extremely high interest rates, and if the borrower fails to repay, he or she will be exposed to harsh debt collection tactics.
Borrowers face unconventional debt collection methods, including data falsification, blackmail and blackmail on social media platforms. These practices cause some Ugandans to suffer from depression, lose respect among their peers and, in worst cases, lose their jobs.
In an interview with Rachel Vanessa Mwezi, Manager, Microfinance Institutions, Uganda Microfinance Regulatory Authority (UMRA), she said unregistered and unauthorized money lending apps are wreaking havoc in the digital finance sector. he pointed out. She explained, “These apps blackmail, blackmail, blackmail and falsify data against people who cannot meet their loan obligations.”
UMRA regulations
Mr Mkhwezi highlighted that UMRA has established guidelines to regulate the practices of registered and licensed money lending apps. These digital lending guidelines ensure that app-based lenders do not abuse customers in draconian ways such as data shaming.
She cited Regulation 15, Subsection C, issued under the Digital Lending Regulations, stating: “Digital credit providers must not make unauthorized or unsolicited phone calls, social media channels, or messages to the contact list of a customer who is not a party to a loan transaction.”
Mr Mkhwezi stressed that such activities are illegal and those who engage in such activities risk being shut down and excluded from Uganda's financial sector.
“As a regulator, we also assure the public that following the issuance of the guidelines, we will take action against loan product apps that are abusing this sector. “We will ensure that illegal apps that are not being used are shut down,” she said.
Additionally, the Uganda Microfinance Regulatory Authority does not license institutions that provide loans without having a physical office. Most of the apps registered with UMRA have offices, which provide a mechanism to track where operations are performed.
“There is no licensee operating a money lending app and not declaring it. According to the Digital Lending Regulations, each institution operating a money lending app should be operated by one company,” Mkhwezi said. Ta.
However, in a separate interview, Mr. Ronald Egesa, the brain behind the movement against the loan applications, highlighted the weaknesses within UMRA that enable the continued illegality of these loan applications in the country. He explained that his investigation revealed that only 3 out of 3 loan applications sanctioned by UMRA resulted in over 33 illegal applications plaguing Ugandans.
“The people at UMRA are not doing their job. They killed Ugandans in their duty to regulate these financial companies. These companies are running apps that are not in the name of licensed entities. “This is against the guidelines and is being monitored by regulators,” he said.
Mr. Egesa revealed that UMRA is compensating victims who dare to report problems, raising concerns that they too are third-party players in the illegal operation of these money lending applications. are.
“UMRA's Director of Supervision told me that there is a history of people coming to compensate UMRA and the complainants who have done their utmost to pursue this matter,” he said.
He explained that loan applications use pre-registered numbers as a way to circumvent the activation of mobile money services, which could potentially reveal the identity behind the numbers. By not associating a number with a specific individual, operators can use it to harass borrowers with insults and constant phone calls without being easily tracked.
sickening robocalls
He also said loan apps employ simboxing technology that allows them to make robocalls that continuously switch numbers, making it difficult for authorities to track and identify the culprits.
This highlights a weakness on the part of carriers as they continue to allow these numbers to operate. On the other hand, this poses a significant security risk, as criminal organizations could exploit this loophole, further complicating efforts to combat domestic illicit activities.
Additionally, he said personal data is captured from borrowers when loan applicants install mobile applications and request permission to access various aspects of their devices, including the camera, contact list, call logs, and text messages. Ta.
“When a borrower grants these permissions, they are giving electronic consent for the app operator to access their information. This means that the operator behind the app can This means that they can obtain and use the borrower's personal data, including to contact and even blackmail them. By misusing these granted permissions, loan applicants can gain access to sensitive personal information. and use it for their own purposes, which can lead to privacy violations and harassment of borrowers and their contacts,” Egesa said.
Mr. Egesa suggested that for these loan applications to be legal, they must comply with regulations and guidelines set by regulators such as the Uganda Microfinance Regulatory Authority and the Bank of Uganda.
To function within the legal framework, loan apps must ensure that only aggregated borrowers in good standing with UMRA and other regulatory bodies are allowed to operate. This means we must conduct thorough due diligence on our borrowers, verify their identity, assess their creditworthiness, and comply with all licensing requirements.
Additionally, loan apps should refrain from engaging in illicit methods such as harassment, unauthorized data access, and illegal debt collection practices. By operating with transparency, ethics, and full compliance with the law, these applications can positively contribute to the financial ecosystem and provide legitimate financial services to borrowers in need. .
Egesa also pointed out that it is imperative that loan apps prioritize consumer protection, data privacy and regulatory compliance to ensure sustainable and lawful operations within the financial sector.
victim
When the Observer contacted one of the victims of these apps, she spoke on condition of anonymity to share her harrowing experience. Struggling financially, she obtained a loan from Centehub Plus, an online money lending application, as she frequently received notifications on her phone about instant loans.
She explained that she borrowed Sh50,000 but received only Sh24,000. This means an interest rate of 108.3%. She had to repay the money within seven days. When she failed to do so, the debt quickly ballooned to Sh100,000.
“From the third day they started calling me, demanding repayment and threatening to call everyone on their contact list if I didn't comply,” she said.
“They sent a message to all my contacts, attached a photo of me, labeled me a scammer, and urged them not to engage with me.”
She added that several of her friends and family members were told they had to pay various amounts to Centehub. The harassing messages and phone calls continued, and some of her contacts told her that she had been arrested by police.
Due to her medical history, this situation caused her significant stress, resulting in persistent headaches due to name calling, insults, and vulgar language over the phone.
“They called my friends and family, tarnished my reputation and even threatened to harm me if I didn't pay,” the victim recalled.
She also mentioned that her supervisor discovered that she had falsified data, which led to her being suspended for two weeks. Even after returning to work, he received a warning letter indicating that he could be fired if such an incident occurred.
Another victim, who was interviewed by the Observer on condition of anonymity, said after failing to repay a Sh100,000 loan within the grace period, she woke up one day and was shocked to find a WhatsApp group created by a debt collector from her loan application. It was revealed that he received it. . The group included all of his contacts, and the debt collectors humiliated him and called him all kinds of names.
“I took out a loan because I had financial constraints on my house, but after I received the loan, I received frequent calls from debt collectors, and they often made arrogant calls telling me that if I didn't repay the loan, they would do something bad to me.'' “It became like this,” the victim recalled.
He explained that the shame of debt devastated him and as a result his reputation was tarnished even among those who held him in high esteem. The debt collector exaggerated the amount he borrowed.
“I had to call some of the people that debt collectors had contacted me to explain what really happened. Because of their actions, I lost work that people normally would have given me. I ended up losing that offer,” he said.
When the Observer contacted Timothy Kaja, a legal representative at KTA Advocates, he said government agencies, particularly the Uganda Microfinance Regulatory Authority, are working with the Uganda Communications Commission (UCC) to operate illegal money lending apps. He pointed out that it should be definitely blocked. In Uganda's digital environment.
“The UCC should be able to identify money lending apps that are not under UMRA's jurisdiction and prevent them from operating in the country, just as it did with Facebook,” he said.
Kaja pointed out that illegal lending by unregistered money lending apps is done through mobile money-based networks. In most cases, if a borrower fails to repay, he or she is exposed to data fraud. He called on companies such as MTN and Airtel not to allow money lending apps to operate without obtaining the necessary license from UMRA.
“The Bank of Uganda must also take action against other PSO aggregators who are allowing unregistered money lending apps to provide loans without a license. We should,” Kaja said.
Regarding the data fraud activities carried out by illegal money lending apps operating in Uganda's digital space, Kaja said that under Uganda's Data Protection and Privacy Regulations 2021, it is not permissible to share personal data without consent. He pointed out that he had not done so.
