Dude, where’s the regulator? – Newspaper

Remember all the hubbub (on Twitter) about how many loan shark apps had permeated the Play Store in Pakistan and scammed ordinary people with misleading claims and exorbitant interest rates? All Google had to do was notice and remove some of the names.

Well, it lasted less than two months, as two of the apps removed from the Play Store not only returned, but are currently in the top five in the finance category. Meanwhile, some unlicensed players removed a page of Islamic militant books and came back with a new name, all dry cleaned. The entire episode seems to have made absolutely no difference to their modus operandi: the annual percentages are still grossly understated and the misleading marketing campaigns are in full force.

Meanwhile, the regulator continues to turn a blind eye, lest it actually has to do something about the problem instead of asking the violators themselves to self-regulate. He did so last time when the issue came up, calling a meeting with non-banking digital financial firms and issuing a press release that unlicensed players are bringing a bad name to the industry.

One wonders where the regulator’s priorities lie: with its licensees or with the public it is responsible for protecting? Unfortunately, all the evidence screams first. Take the case of bancassurance, which allowed insurance companies to take on new business by taking advantage of bank branches which, in turn, generate easy commission income. All at the expense of the customer, because the product is sold and designed in such a way that policy buyers – often widows and retirees – are misled into it and do not get a return of capital, forget about the return on capital .

SBP and SECP must realize that customers also deserve at least some of the benevolence they extend so generously to their obliged entities

In recent years, it has been the fastest growing revenue stream for insurance players, Islamic or conventional alike, while earning banks commission income typically in excess of Rs 1 billion. The scam of one of the most vulnerable groups, although morally deplorable, is still quite expected of bankers and insurers like leeches. But regulators’ continued neglect of the situation is concerning.

Both the State Bank (SBP) and the Securities and Exchange Commission of Pakistan (SECP) are involved, the former overseeing banks while the latter has been given the mandate of insurance companies. But instead of regulating them, the two entities have become more their champions. Don’t get me wrong, they should definitely do everything in their power to promote the respective industries, but not at the expense of the client.

Perhaps the proximity to industry professionals over long periods of time has made regulators more sympathetic to their cause. At least more than they are for customers, who do not have the same access to these decision makers and are heard.

Perhaps the proximity to industry professionals over long periods of time made the authorities more sympathetic to their cause

Or maybe this looking the other way is just the fact that regulators are trying to overcompensate. After all, they too have to show progress. The two examples above fit perfectly into this context: the penetration of insurance and loans has remained dismal in Pakistan for a very long time. And when a certain category finally seemed to work, no matter what tactics they used, they were willing to ignore the shortcomings.

Of course, SBP and SECP were also given the task of developing their respective industries. And there’s absolutely no denying the many great initiatives they’ve undertaken, whether it’s Raast, Roshan Digital Accounts, or the regulatory sandbox. But they are still regulators first, with a responsibility to the public – which is jeopardized every time someone pays more than 30% in fees for a 30-day loan or an elderly person spends their hard-earned money. only for a banker. eliminate most of it in the short term.

Examples are not lacking, but their scope deserves special attention. For example, licensed digital lenders alone disbursed 839,281 loans worth Rs 6.14 billion to 365,239 borrowers in 2021. Figures reported by SECP for 9MFY22 were Rs 11 billion, mostly dominated by the two actors of the instant loan.

Similarly, new bancassurance customers for each bank can number in the tens of thousands. When exactly will the regulator realize that customers also deserve at least some of the benevolence it so generously bestows on its obligated entities?

Posted in Dawn, The Business and Finance Weekly, September 12, 2022

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