Loan sharks go digital: Pakistanis crushed by loan apps, social media scams

Dubai: Pakistan’s Senate Standing Committee on Information Technology and Telecommunications was presented with chilling details this week on the scale of online loan scams that are ensnaring Pakistanis already battered by inflation and shrinking incomes.

Officials from the National Cyber Crimes Investigation Agency (NCCIA) revealed that certain mobile loan apps were charging interest rates as high as 1,800%, while also accessing users’ phone galleries and contact lists to harass, threaten and blackmail them into repayment.

“People borrowed as little as Rs5,000 for food, but ended up trapped in a cycle of debt,” one NCCIA official told the committee, underscoring the human toll of digital predatory lending.

The Securities and Exchange Commission of Pakistan (SECP) had licensed dozens of such companies in 2020 without adequate safeguards. Since then, amid mounting complaints, the regulator has imposed stricter rules capping interest at 100% and banning apps from accessing personal data. More than 90% of fraudulent loan apps have reportedly been shut down.

But the threat has not gone away. As regulators clamp down on mobile apps, scammers have shifted to social media platforms like Facebook, where they publish sponsored ads promising “interest-free loans.” Using the names of reputable organisations to appear legitimate, fraudsters lure desperate borrowers into paying upfront “processing” or “insurance” fees, or into sharing sensitive personal information. Once the money or data is collected, the scammers vanish.

Earlier this year, the SECP confirmed that it had cracked down on 141 unauthorised lending apps in coordination with other agencies. Yet officials admit that fraudsters are now exploiting alternative digital channels to target vulnerable Pakistanis.

The victims often come from low-income backgrounds with limited access to formal banking. For many, the speed and ease of digital credit — money deposited in minutes with no collateral — is irresistible. But as several victims testified, relief quickly turns into harassment. A Rs15,000 loan can spiral into hundreds of thousands through hidden fees, rollovers, and extortion.

Digital rights activists warn that Pakistan’s weak financial literacy and regulatory loopholes make fertile ground for abuse. “These companies operate like loan sharks in people’s pockets. Without stronger safeguards and mechanisms for redress, victims will keep piling up,” Nighat Dad of the Digital Rights Foundation, said in an earlier statement.

Report

The SECP says it is reporting fraudulent ads to the Federal Investigation Agency (FIA) and the Pakistan Telecommunication Authority (PTA), while urging citizens to verify lenders against its official list of licensed companies. But with online loan sharks multiplying, experts warn that desperate borrowers remain at high risk of falling prey to the digital debt trap.

1. The hook — easy, instant cash

Loan apps advertise themselves on Google Play Store, Facebook, TikTok, and other social media platforms.

They promise “instant loans in minutes,” no paperwork, no guarantor, no collateral.

People in urgent need of cash, to pay for food, utility bills, or emergencies, download the app.

2. Registration

The app asks users to fill out a simple form: CNIC, phone number, and bank account.

Crucially, it requests permissions to access the phone’s contacts, photos, and gallery.

Many borrowers, eager for cash, click “Allow” without realising the consequences.

3. Loan disbursement

A small loan (say Rs5,000—20,000) is sent to the borrower’s bank or mobile wallet, often within minutes.

But the amount received is less than promised, because the app deducts the processing fees, insurance charges, registration fees, etc

4. Hidden interest rates

The advertised interest rate may look low, but in reality, apps charge exorbitant daily or weekly interest.

Some borrowers end up paying effective annual rates as high as 1,800%.

5. Aggressive recovery tactics

Repayment deadlines are often as short as 7 days, not weeks or months.

If the borrower misses a payment, the app operators bombard them with calls and messages.

They call family, friends, and colleagues from the contact list to humiliate them.

Threatens to leak private photos or “photoshopped” images from the gallery.

6. Debt cycle

To pay off one app, many borrowers take loans from another app, falling into a debt spiral.

A Rs15,000 loan can quickly balloon into Rs200,000+ with penalties and rollovers.

7. Exit scam

Some apps disappear after collecting repayments or fees, leaving users with no way to complain.

Because many operate from overseas or under fake registrations, regulators also struggle to track them down.