I got an interesting email from a young Nigerian today alerting me to the problem of social shaming and microlending. He wanted me to promote his petition and so I did a little research. (This post was a Twitter thread, which I tried to share with the young man in question. He pointed out that Twitter is currently blocked in Nigeria, so I’m expanding this slightly and putting this on my blog so it can be better shared by him and others.)
App-based microlending is popular in Nigeria, both because banks generally require collateral for loans and because the bureaucracy involved with lending can be overwhelming. So there’s a flock of new lending sites springing up, like FairMoney. FairMoney reported lending out $93m USD in 2020 in amounts from $3-$1000. Interest rates ranged from 30-260% APR, against 15-20% APR for bank rates. In other words, these are payday loans with sometimes predatory terms, but they’re what people can access.
FairMoney may play hardball with high rates, but there’s another tactic that’s raising eyebrows – and inspiring petitions: public shaming. Fail to pay your loans with OKash, a rival to FairMoney, and the app begins sending notes to the contacts in your phone! OKash (made by the same Chinese company behind the Opera browser) has a clause in the terms of service that reads “In the event we cannot get in contact with you or your emergency contact, you also expressly authorise us to contact any and all persons in your contact list.” In other words, default on a loan and we tell your parents, your friends, your boss… OKash has raised eyebrows in Kenya, where there’s no financial regulatory structure to protect what seems like an obvious privacy violation.
These techniques have gone even further in Nigeria. Apps access your social media and post on your behalf. Collection agents, filling a daily quota of collections, call your friends late at night and tell them they are the “guarantors” of your loan. Some collection agents use background sounds like sirens to imply that they’re in a police car, coming to capture you.
What’s most fascinating to me about this is that this is the dark side of an idea popularized a few years ago: credit scoring via social networks. The theory: analyze enough customers and their social networks and you’ll detect who is creditworthy. This is one of those ideas that’s probably terrible even if it works – imagine getting rejected for a loan and told that your friends network predicts that you’ll be a bad borrower? How does one contest that decision? Ensure that the algorithm isn’t unfairly biased against certain groups of people? But proponents argue that the upside is that this form of credit check could open lending to billions of people who have phones, but don’t have existing credit histories.
Indeed, OKash explains its need for your personal information in terms of determining your eligibility for lending: “OKash will access your mobile device for the permission of (but not limited to )contacts, location,SMS,calendar and camera to estimate the suitable loan offer for you. It is a very important part of evaluation process.” But can you trust OKash with your data? “We promise that we will never disclose your personal information to third parties without your consent. (exempted late refund and service requirement).” Oh yeah, that little exemption…
I ask students always to think adversarially about tech and ethical issues. One of the most popular assignments is when I ask students to look at a tech they’re trying to improve and write a Black Mirror episode about it. Student projects often steer in a very different direction once they’ve had the chance to consider how their preferred tech can – and likely will – be abused. It’s not that hard to imagine data used to determine creditworthiness being used, instead, to threaten and harass customers who fail to pay up in a timely fashion. In some ways, it’s amazing that it hasn’t happened sooner in societies with poor consumer protection systems.
Fortunately, Nigerian authorities are starting to act, fining another lender, Soko Loans, for invasion of privacy. And we’re starting to see more traditional methods, like blacklists for repeat deadbeats.
Two takeaways from me: 1) Tech innovation is always going to run ahead of legislation, and that can mean terrible things for consumers. 2) When you hear an optimistic new idea for financial inclusion, imagine the worst way it can be weaponized and work to eliminate it.