Federal Government Bars Illegal Online Banks as it Approves 173 Loan Apps in Nigeria

The digital loan apps in Nigeria has been under increased scrutiny over the past year due to reports of harassment of borrowers and high interest rates. To address these issues, the Federal Competition and Consumer Protection Commission (FCCPC) began a registration drive to protect citizens from the atrocities of these apps. As of March 27, 2023, the FCCPC has approved 173 digital lending applications to operate in the country.

Of the 173 apps, 119 have received full approvals while 54 have received conditional approvals. The FCCPC released a ‘Limited Interim Regulatory/ Registration Framework and Guidelines for Digital Lending 2022’ to regulate the digital lending space and make registration and approval a prerequisite for companies seeking to operate in the space. The deadline for registration has been shifted multiple times, but the FCCPC has now closed registration, and companies without approvals will not be able to operate in the space.

Commenting on its effort against digital lending apps in August 2022, the FCCPC stated that the inter-agency Joint Regulatory and Enforcement Task Force has developed a Limited Interim Regulatory/ Registration Framework and Guidelines for Digital Lending, 2022 as the first and interim step to establishing a clear regulatory framework. The framework is enforceable immediately and requires permission to proceed in digital lending.

The guidelines also mandate different service providers in the relevant ecosystem, such as banks, access/download platforms or stores, technology providers, and payment systems, to require regulatory approval before providing services. The approved loan apps listed by the commission include Branch International Financial Services Limited, Fairmoney Micro Finance Bank, Pivo Technology Limited, Renmoney Microfinance Bank Limited, Carbon Microfinance Bank Limited, Creditwave Finance Limited, amongst others. Loans without the FCCPC’s approval will be removed from the Play Store by Google and unavailable for download.

Google Play announced updates to its Developer Program Policy in November, which mandated that digital money lenders in Nigeria, India, Indonesia, the Philippines, and Kenya must conform to regulatory rules. This was expected to come into force from January 31, 2023. In March, Google took down hundreds of unapproved loan apps from the Play Store in Kenya according to a report on TechCrunch. In February 2023, the Nigeria Data Protection Bureau revealed that a national committee, made up of federal agencies, was working in tandem to clip the activities of illegal loan apps in the country.

Overall, the FCCPC’s approval of 173 digital lending applications is a step towards regulating the digital lending space in Nigeria and protecting citizens from predatory practices. The limited interim regulatory framework and guidelines for digital lending will provide some clarity and direction for the industry, while the enforcement of regulatory rules by Google and federal agencies will help to weed out illegal loan apps. The hope is that these efforts will lead to a fair, transparent, and mutually beneficial digital lending industry in Nigeria.