Dangerous trap of mobile phone loans

Private sector employee Shaheen Hossain borrowed Tk 6,000 Taka in three phases via a mobile app last June. For this short-term loan, he ended up repaying nearly Tk 10,000, implying an interest rate of 800 per cent.

Shaheen Hossain told Prothom Alo that he refused to pay as the app demanded more money. He then received threats on WhatsApp stating that his personal information stored on his phone would be leaked and his relatives would be contacted.

He said, "The interest kept increasing daily, and I was receiving threats. Eventually, I repaid the money and swore never to take a loan like this again."

The app Shaheen used was called FinCash. Prothom Alo has identified 30 such apps operating in Bangladesh, despite being illegal.

According to victims’ accounts and reports published in the media in several South Asian countries, the operators of these apps advertise on Facebook and other social media platforms to lure users. When someone downloads an app to take out a loan, it accesses and collects various data from the person’s mobile phone without their knowledge, including photos, videos, contact numbers and text messages. The operators then demand high interest on the loans. Those who fail to repay face harassment.

While this trend is new and hasn't spread widely in Bangladesh, the media from India, Pakistan, and other South Asian countries reports that it has taken a dangerous turn there.

According to a 12 December 2024 report by Indian media outlet NDTV, a young man named Narendra (25) from Andhra Pradesh took a 2,000 Rupee loan from an app after his wedding. He was asked for an excessive repayment amount, which he refused to pay, leading to harassment. At one point, he was threatened with the distribution of distorted images of his bride.

The NDTV report further stated that Narendra ultimately committed suicide, another tragic incident resulting from harassment by these illegal loan apps that have mushroomed in India.

In Bangladesh, loans are legally provided by banks, financial institutions, and microcredit organisations. Informal loans secured by pledging gold jewelry are common, as well as mahajani (moneylender) loans.

According to Bangladesh Bank, as of last June, the private sector has outstanding loans amounting to Tk 18. 25 trillion in the banking system.

The Microcredit Regulatory Authority (MRA) reported that as of June 2024, the microloan balance was Tk 2. 62 trillion.

Currently, BRAC Bank, Dhaka Bank, and Prime Bank are offering loans via apps. Mobile Financial Service (MFS) provider bKash also provides app-based loans in partnership with City Bank.

Despite this large loan market, there is demand for urgent and easy loans at the individual level. Various apps are exploiting this opportunity, even though unauthorised loans, online gambling, unauthorised currency exchange or forex trading, and cryptocurrency (a type of digital currency) transactions are prohibited in the country. Financial transaction service platforms cannot be operated by unregistered entities, yet there are ongoing operations of app-based loans, gambling, and forex trading.

When asked, Arif Hossain Khan, spokesperson for Bangladesh Bank, told Prothom Alo he wasn't aware of illegal loan apps. The central bank will take all necessary initiatives to raise awareness among people about the frauds of digital loan apps.

By reviewing Facebook ads and Google Play Store, at least 30 apps conducting loan activities in Bangladesh have been identified. These apps carry various names like Bongo Cash, Dhaka Fin, Taka Now, Easy Taka, Fin Cash, Sathi Loan, Asha Loan, Suvidha Loan, etc. Some apps slyly use well-known microcredit organisations' names.

For instance, an app named Sathi Loan offers personal loans up to Tk 150, 000 with interest ranging from 18-26 per cent annually. This app appeared in the Google Play Store in February this year and has been downloaded over a hundred thousand times.

Another app named ''Quick Loan'' offers loans up to Tk 300,000 at 18 per cent interest. The app launched on the Play Store in September last year and has been downloaded over half a million times.

One of the victims of harassment after borrowing from an app is Saeed Mia from Mirpur, Dhaka. Before Eid-ul-Azha, he couldn't withdraw cash from several ATMs, and in urgent need, he applied for a loan from an app advertised on Facebook.

Saeed Mia told Prothom Alo that he took a total of Tk 24,000 in loans, yet after just a week, the app showed arrears of Tk 81,000 with interest. He repaid Tk 54,000. He complained that upon refusing to pay the remainder, his acquaintances were called and threatened.

Victims shared that while applying for the loan, they were asked for images of their National ID cards (NIDs) and phone numbers linked to financial services (bKash, Nagad, etc.). The money was sent to their mobile financial service numbers.

The loan application process required installing the app on the mobile phone. The app sought permission to access the phonebook, photos, messages, and location data, failing which it would not operate.

Mirpur's victim Saeed Mia mentioned that during the app installation, he had to grant access to various phone data, later realising that all numbers and information on his phone went to the app operators.

The growing usage of these loan apps in Bangladesh is evident from data by web traffic analyzer SimilarWeb. The website lists Bitcoin, online trading, and loan apps among popular finance apps in Bangladesh.

The operators of these apps have no office or address. There is no information on who runs them or from where.

A statement from the US Department of Justice in April revealed the existence of online scam syndicates near the Cambodian, Laos, and Myanmar border. Citing UN data, the statement mentioned that by the end of 2023, the conservative estimate of annual financial theft by these syndicates worldwide would reach around $640 billion (approximately Tk 8 trillion).

The Indian government has recently initiated actions against these illegal loan apps. According to an NDTV report on 12 August, as of June, India had shut down 3,718 apps.

Prothom Alo spoke with five victims. One of them lodged a complaint via email with a police agency. The others did not even do that. The Criminal Investigation Department (CID) and detective branch (DB) of Dhaka Metropolitan Police claim they have received no complaints or cases.

Analysts stress the need to act before such fraud reaches a critical level in Bangladesh; otherwise, there is a risk of significant losses to individuals and increased money laundering.

Professor BM Moinul Hossain from the Institute of Information Technology at Dhaka University told Prothom Alo that these crimes continue in evolving forms. A lack of user awareness, irresponsible platforms, and ineffective action by law enforcement and regulatory bodies are equally to blame.