The Securities and Exchange Commission of Pakistan (SECP) has received 288 complaints against Sarmaya Microfinance (Private) Limited and resolved 283 complaints from customers including exorbitant interest rates and other charges.
Data revealed that Sarmaya Microfinance is a Non-Banking Finance Company, licensed on February 01, 2022, by the SECP to undertake Investment Finance Services (restricted to microfinancing only), under the administered legislation.
The relevant administered legislation comprises Part VIII A of the Companies Ordinance, 1894, Non-Banking Finance Companies (Establishment and Regulations) Rules, 2003, and the Non-Banking Finance Companies Notified Entities Regulations, 2008.
The major concerns raised in these complaints were exorbitant interest rates and other charges, misleading disclosures regarding loan amount and tenor, and coercive recovery tactics. However, it was noted from the contents of these complaints that the customers after defaulting on the loan end up lodging complaints with SECP.
The information further revealed that Sarmaya Microfinance is currently operating two digital lending apps by the name of Easy Loan and PK Loan through which microloans ranging from Rs. 3,000 to 30,000 are provided to customers for a short tenor ranging from 7 to 90 days. The customer can only proceed towards disbursement of the loan after agreeing to the said policies of the company displayed on the apps.
According to the loan demonstration shared by the company, the loan amount along with the repayment amount and repayment date is clearly disclosed to the customers before the loan disbursement. Customers always have the option to cancel the loan in case they do not agree to any terms and conditions of the loan provider company.
Sarmaya Microfinance was licensed by the SECP to undertake Investment Finance Services (IFS) restricted to microfinancing only as a Non-Bank Microfinance Company (NBMFC). In terms of Rule 2(1)(xxxiv) of the Non-Banking Finance Companies (Establishment and Regulation) Rules, 2003; an NBMFC means a non-deposit-taking NBFC primarily engaged in the business of microfinancing as specified by the Commission from time to time.
As per Regulation 2(1)(xxviia) of the Non-Banking Finance Companies and Notified Entities Regulations, 2008 (NBFC Regulations, 2008), microfinancing is defined as finance provided to a poor person or microenterprise. Furthermore, poor person or microenterprise is also defined in NBFC Regulations, 2008.
Under the current NBFCs Regulatory Framework, the SECP grants an Investment Finance Services license to NBFCs for undertaking lending activities (including microfinancing, discounting, leasing, and housing finance), and a licensed entity can engage in lending through conventional means or through digital medium, and there is no separate license issued for digital lending.
Since digital lending is a recent phenomenon, there is currently no specific requirement in place covering the digital aspect of the lending and the same requirements are applicable as to other NBFCs apply, SECP added.