Social media new hunting ground for loan sharks
Regulators’ efforts leave much to be desired
Staff Report
ISLAMABAD: As regulators intensify efforts to curb predatory lending through mobile apps, loan scammers are shifting tactics, exploiting social media platforms to target vulnerable borrowers with deceptive ads and fake promises of “interest-free loans.”
The digital debt trap is deepening despite recent crackdowns. According to Shahid Rasheed Butt, former president of ICCI, certain mobile loan apps had charged interest rates as high as 1,800%, while coercing borrowers through access to their phone galleries and contact lists.
He highlighted that victims, often seeking as little as Rs5,000 for food or utility bills, found themselves trapped in cycles of harassment, blackmail, and escalating debt. In one instance, a Rs15,000 loan ballooned into over Rs200,000 through hidden fees, rollovers, and extortion.
The State Bank of Pakistan reported that by mid-2025, digital lending platforms accounted for approximately 27% of all consumer credit disbursed in Pakistan, up from just 12% three years earlier. However, the informal and unregulated segment of these loans, often issued through unauthorised apps, constitutes an estimated 40% of the volume, affecting low-income groups who lack alternatives to formal banking.
While SECP confirmed that it had taken action against 141 unauthorised lending apps since 2023, officials admitted that fraudsters are bypassing app store restrictions by migrating to platforms like Facebook and TikTok. These scammers impersonate legitimate financial institutions, lure users with sponsored ads, and collect upfront “processing” fees or sensitive personal data before disappearing because many operate overseas or under fake registrations.
Shahid Rasheed Butt said that this shift exposes a critical blind spot in Pakistan’s digital oversight. While app-based fraud is being addressed through inter-agency coordination, social media remains largely unregulated. The SECP says it reports fraudulent ads to the Federal Investigation Agency and the Pakistan Telecommunication Authority and urges citizens to verify lenders against its list. However, enforcement across platforms is inconsistent, and the absence of a centralised grievance mechanism leaves victims with few options.
Globally, predatory lending via digital platforms is a growing concern. A 2024 report by the Organisation for Economic Cooperation and Development found that up to 35% of digital credit loans in emerging markets come with undisclosed or excessive fees, with Southeast Asia and South Asia being hotspots. Many countries struggle to regulate the migration of such scams onto social media and messaging platforms, highlighting the need for international cooperation and advanced monitoring technologies.
Shahid Rasheed Butt warns that Pakistan’s weak financial literacy and fragmented regulatory framework make it fertile ground for abuse. These companies operate like loan sharks, and without stronger safeguards and mechanisms for redress, victims will keep piling up.
For many victims, the speed and ease of digital credit is irresistible. But the relief is short-lived. Borrowers who miss repayment deadlines, often set at just seven days, are bombarded with calls and messages. App operators contact family members and colleagues to humiliate them, and in some cases, threaten to leak private or doctored images from the user’s gallery.
In a tragic incident from July 2023, a man from Rawalpindi committed suicide due to blackmail by an online loan app staff member. The FIA had launched a probe and later raided the office of the Bharosa App in Islamabad.
Despite growing awareness, the regulatory response remains reactive. Experts say Pakistan must now expand its digital finance oversight beyond app stores into ad networks, social media platforms, and telecom infrastructure. Until then, the debt trap will remain just one click away.
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