Using Shame, Lending Apps in India Squeeze Billions Out of the Desperate

With techniques honed in China, a new breed of company offers expensive loans to people devastated by the pandemic. If they can’t repay, family and friends hear all about it.

By Mujib Mashal and Hari Kumar

HYDERABAD, India — The harassing calls began soon after sunrise. Kiran Kumar remained in bed and, for hours, thought about how he was going to end his hostage of a life.

The cement salesman had initially borrowed about $40 from a lender through an online app to supplement his $200-a-month salary. But he couldn’t pay the mounting fees and interest, so he borrowed from others. By that morning, Mr. Kumar owed roughly $4,000.

Even worse, the lenders had the phone numbers of those closest to him, and were threatening to make his problems public.

“If I am labeled a fraud in front of everyone, my self-respect is gone, my honor is gone,” Mr. Kumar, 28, said in an interview. “What is left?”

The authorities in India are increasingly worried that many more victims like Mr. Kumar may be out there. They believe a new breed of lender, its technique sharpened in China, has been preying on working-class and rural people who have been devastated by the impact of the coronavirus on the Indian economy.

These lenders don’t require credit scores or visits to a bank. But they charge high costs over a brief period. They also require access to a borrower’s phone, siphoning up contacts, photos, text messages, even battery percentage.

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