Chinese investors, who once poured billions of rupees into Pakistan’s digital lending sector, have now withdrawn their investments following a crackdown on online loan apps.
Sources are revealing that Chinese investors played a significant role in fueling the rapid growth of Pakistan’s digital lending industry in 2022, contributing millions of rupees. While some of these digital lending apps operated legally with the ratification of the Securities and Exchange Commission of Pakistan (SECP), others emerged without authorization because of weak law enforcement by both the SECP and the State Bank of Pakistan. However, as regulations tightened, the sector had encountered increased scrutiny.
Approximately one hundred and four digital lending organizations were provided with licenses between 2020 and 2025, but five licenses were cancelled due to violations, SECP reported.
Initially, borrowers were capable of securing loans of up to Rs. 20,000, despite exorbitant interest rates and aggressive recovery tactics employed by these lending platforms. Reports suggest that over 20 million borrowers availed loans amounting to billions of rupees through these apps, with more than 15 million users downloading the eight major lending apps available on Google Play Store.
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The Government’s clampdown on both legitimate and illegitimate digital lenders escalated right after a tragic incident in July 2023, when Muhammad Masood, a resident of Rawalpindi, took his own life. It is reported that he was highly blackmailed by an illegal loan app, which had gained unauthorized access to his data, including family contacts and social media accounts.
As part of a nationwide operation in 2023, the Federal Investigation Agency (FIA) had registered 74 cases against illegal loan app organizations based on complaints from victims. During this operation, 17 suspects linked to illegal lending schemes were detained from different cities. Moreover, dozens of bank accounts have been blocked already.
The administrative bodies have taken mandatory steps against unregistered landing organizations, and these authorities are leaving no stone unturned in gaining access to their bank accounts and investigating their operations.
Sources are keeping on depicting that some of the organizations finally succeeded in resolving their disputes with the FIA, leading to the suspension of the inquiries that are ongoing. However, despite these efforts, dozens of victims are still anticipating for getting justice, and all this is highlighting the need for continued regulatory enforcement to protect consumers from exploitative lending practices.