The menace of illegal online banks
The operation of online banks in Nigeria, which are invariably illegal, has become a source of serious concern to many Nigerians. These illegal “banks” which are predominantly owned by foreigners, particularly Chinese who make up over 95 per cent of the owners, have constituted themselves into some sort of nuisance to the Nigerian economy by preying on the vulnerability of the average Nigerian who has been severely impoverished with the onset of the COVID-19 pandemic.
The preponderance of these online banks has spelt some doom for many undiscerning Nigerians who have been caught in their web of unfulfilled promises of ridiculously low interest payments for loan applicants as well as mouth watering returns for depositors and investors. These unwholesome developments are some of the clear spill-over of the uncertain state of livelihood in the country. Hence the offers from these banks have appeared as attractive investment options to unsuspecting Nigerians who have seemingly thrown all caution of ethics thrown to the wind in their quest to make quick gains.
In this regard, the recent clampdown on these illegal financial institutions by the Federal Competition Consumer Protection Commission (FCCPC) in collaboration with the Independent Corrupt Practices and other Related Offences Commission (ICPC), among others is quite welcome. The raid on the illegal online banks, through a court order, by these agencies in conjunction with National Information Technology Development Agency and the Nigerian Police Force has tended to instil some sanity into the sector. These online banks which operate large in the Opebi area of Ikeja, Lagos State are reported to have violated the privacy of their customers and carried out numerous unethical financial services transactions.
The FCCPC through its Chief Executive Officer, Babatunde Irukera, had alleged that the privacy of the online banks are being violated in the debt recovery activities with their adoption of the “naming and shaming” strategy in their operations, thus violating the ethics of how lending is done generally. Other findings which indicate that many of these banks are being operated by the same person and that they are not registered with the Corporate Affairs Commission, among others, are quite disturbing.
Other related issues on this imbroglio are equally disturbing. The loan applications to the banks are presented as having minimal interest and with the option of paying at short period. Understandably, given the high level of poverty in society, people are generally lured by the expected quick gains. Eventually, many end up being trapped in the scheme. Of course, in the event of default, the “name and shame strategy” is applied.
Usually, this is linked to the phone log of their interaction with their customers aimed at defaming the defaulters. The operation of these banks has now become a misnomer because it started involving high ranking members of society including senators of the Federal Republic. With the rising rate of poverty in the country, in many cases, people borrow for consumption. A lot of people that access the fund often do so without the intention to pay back or robbing one applicant to pay another. These are people that are not living within their means.
A way out of this mess is the pursuit of the steps being taken by the FCCPC in following the legal option to address the issue and bringing the unscrupulous Chinese businessmen to book. These persons are leveraging on the very low interest rate of about five per cent in their home country and marketing it to unsuspecting Nigerians at much higher rates. Currently, the FCCPC should follow up on the pending Bill at the National Assembly in this regard. In addition, deposit money banks can be enlisted in this battle, to freeze the accounts of the illegal online banks to serve as a deterrent for further expansion of the illegal business. Also given that these banks use application software (Apps) in the operations, multinationals such as Google and Apple can be approached to enhance the shutting down of these Apps. Finally, people should live within their means and stop borrowing for purchase of items such as high-profile mobile phones and other items not too essential for daily subsistence living.