In a piece in Harvard Business Review, I noted that companies like Google, Amazon and Facebook are ICT utilities. In other words, they are the electricity and water boards that run the digital economies. The fear of these utilities is wisdom because without them, it is going to be hard to run an effective digital business at scale.
Now, Google is using that power to do good: stop predatory lending via apps in its Play store. Of course most African governments have seen 35% monthly interest rate as “innovation” – the very reason nothing has been done in that space. Technically, if you run the math in some lending apps in Africa, people are borrowing at effective annual interest rate of 250%!
Google now wants all mobile loan apps using its Play Store platform to ensure the repayment period for loans is not below 60 days.
It said developers working on personal loan apps need to have data about the loan product in the metadata that allows it to verify the app is not charging astronomical interest, which is common with “payday loans’.
As typical, Kenyan parliament has called for review because Google has taken action. If you check, some of these apps are caging people despite the sound of liberation they beat; governments paid no attention for years. I hope Google follows through and fix this modern day shylocking!
Banks are forbidden to lend at more than 40% annual interest rate in some African countries; yet, people celebrate startups lending at 15% monthly as “innovators”. Some have received millions of dollars in funding to scale this pain to people. Let’s hope Google helps in a continent where consumer advocates are only there for collecting salaries and nothing more!
The Google Statement
We define personal loans as lending money from one individual, organization, or entity to an individual consumer on a nonrecurring basis, not for the purpose of financing purchase of a fixed asset or education. Personal loan consumers require information about the quality, features, fees, risks, and benefits of loan products in order to make informed decisions about whether to undertake the loan.
- Examples: Personal loans, payday loans, peer-to-peer loans, title loans
- Not included: Mortgages, car loans, student loans, revolving lines of credit (such as credit cards, personal lines of credit)Apps for personal loans must disclose the following information in the app metadata:
- Minimum and maximum period for repayment
- Maximum Annual Percentage Rate (APR), which generally includes interest rate plus fees and other costs for a year, or similar other rate calculated consistently with local law
- A representative example of the total cost of the loan, including all applicable fees
We do not allow apps that promote personal loans which require repayment in full in 60 days or less from the date the loan is issued (we refer to these as “short-term personal loans”). This policy applies to apps which offer loans directly, lead generators, and those who connect consumers with third-party lenders.High APR personal loans
In the United States, we do not allow apps for personal loans where the Annual Percentage Rate (APR) is 36% or higher. Apps for personal loans in the United States must display their maximum APR, calculated consistently with the Truth in Lending Act (TILA).This policy applies to apps which offer loans directly, lead generators, and those who connect consumers with third-party lenders.
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