With the effects of the economic crisis taking a toll on people, online loan service companies are providing a seemingly easy way for people in emergencies to obtain ‘instant’ loans. However, those who have obtained such services allege that these companies harass, threaten, and solicit sexual bribery if they get late with their repayments, which come with sky-high interest rates.
“When there is an emergency, banks don’t give us loans quickly and bank loans take a lot of time anyway. If a family member falls ill or dies, we need money fast. During one such occasion, I saw an ad on Facebook asking me to download a mobile app which would help me to obtain a loan speedily. There was a number on the ad as well, and when I called, they asked me to download the app and enter my details.
“One of the details I had to enter was a photograph of myself with my NIC next to my face. Then the app asks for permission to access our contact list. They also have access to our social media through the app. They mainly communicate with us via email,” explained Thanuja (name changed), a woman who had obtained loan services from an online loan service company.
“They start the services with a loan of Rs. 5,000. This is interest-free to most people, but should be repaid in seven days. The second loan by some companies is usually Rs. 10,000, but they only provide Rs. 7,500 and deduct the interest in the beginning itself. We still have to repay Rs. 10,000 in 10 days at a high interest rate.
“If at some point, we are unable to repay in seven days, the harassment begins. After noon on the sixth day, representatives from the company call and ask to repay, scolding us in foul language. If we had been hospitalised and unable to repay on time, they would message our entire contact list with the picture we submitted, calling us thieves. The company will also lie to the people in our contact list that they are our guarantors and therefore have to be responsible for the debt,” she told The Sunday Morning.
Numerous stories of victimisation
Thanuja revealed that she was now part of a collective of people who had been victimised in similar ways by such companies. They share their stories over a WhatsApp group and support each other.
“One of the most recent incidents we heard from the group is of a woman from Kandy, married to a man from Puttalam, who had taken an online loan in this manner. She had later poisoned herself and her two small children and all three had been hospitalised. She kept messaging the group saying she was going to resort to self-harm because she was under a lot of pressure to repay the debt. We tried our best to protect her; she didn’t die.”
Thanuja further shared that some of their phone numbers had been published on websites where people advertise sex work and their photos had even been edited and uploaded on porn websites. Some women had also been asked to offer sexual bribes to have their debt erased.
“We know at least 30,000-40,000 people in our own networks who are facing these problems,” she stressed.
Thanuja disclosed that complaints to the Police had yielded no results, adding that some Police stations had not even accepted their complaints. “We are not saying that we won’t repay the debt, but we cannot pay the unfair interest rate. Sometimes they charge an interest of 1% per day,” she said.
Meanwhile, speaking to The Sunday Morning, Collective Against Loan Mafia Chairman Damith Perera said that they had identified about 42 companies that provided online loans. He noted that while not all companies employed foul language or sexual bribes to harass their debtors, almost all placed an unfair amount of pressure on them and operated with high interest rates.
“These companies are not registered with the Central Bank of Sri Lanka (CBSL). Some are registered as software companies and have yearly interest rates ranging from 350% to 750%,” he said.
First microfinance, now online loans
Sri Lanka is no stranger to the problem of loan sharks, with the struggles of those who obtained loans from microfinance companies over the past two decades being well-documented.
Microfinance was initially introduced as a solution to the livelihood problems of individuals, especially women, who were unable to obtain financial services from formal banking institutions. However, reports show that it has since led to the downfall of an estimated 2.8 million women in contemporary times while only serving as a lucrative business opportunity for predatory finance companies.
Political economics researcher Amali Wedagedara, speaking to The Sunday Morning, noted that there was no legal framework to govern online loans.
Last month, the Ministry of Finance published a new bill to repeal the existing Microfinance Act No.6 of 2016. The new bill proposes that a regulatory authority be set up to regulate money lending businesses and that all lending services be registered.
“The proposed microfinance regulatory authority mentions digital loans in passing, but there’s nothing substantial. The proposed act says that any form of lending should be registered. Until online loans become a big problem, like when the microfinance bubble burst, people won’t be aware of this. At least with microfinance, you could physically trace the company and reach out to them when you had grievances, unlike with an online company,” Wedagedara said.