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SECP introduces rate caps for digital personal loans

SECP partners with AAOIFI to establish an Islamic finance research
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September 25, 2023 (MLN): In a significant step toward promoting responsible lending and ensuring consumer safety, the Securities and Exchange Commission of Pakistan (SECP) has issued a comprehensive set of requirements for Non-Banking Financial Companies (NBFCs) that offer digital personal loans through mobile applications, as stated in a press release issued today.

The requirements set a maximum limit for the profit rate that can be charged by a nanolender to the borrower.

The total cost cap for nanoloans will encompass all associated fees, including processing charges, service fees, verification fees, loan handling fees, interest charges, late payment penalties, and any other applicable charges.

The cumulative price of a loan shall not exceed the aggregate amount of the principal loan amount.

Moreover, limits have been set for loan rollover. To ensure the uniformity and standardization for the profit rate calculation formulas and brief illustration has been specified in the circular issued by SECP.

SECP is actively evaluating and adapting policies to improve financial access and combat manipulative business practices.

The measures, developed through consultation with stakeholders and industry participants, aim to balance financial inclusion and consumer protection against excessive debt burden.

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Posted on: 2023-09-25T21:02:29+05:00