MSMEs frequently encounter barriers when seeking traditional financing, including minimal credit history, a lack of collateral, and convoluted application processes. These challenges create opportunities for predatory lenders, who exploit the financial vulnerabilities and urgent needs of MSMEs in various ways.
Predatory lenders often impose exorbitant interest rates and undisclosed fees, camouflaging the true costs behind seemingly attractive advertised rates. They employ deceptive marketing tactics, promising quick approvals and lenient terms while concealing risks and expenses. Furthermore, aggressive methods like door-to-door collections and misleading explanations coerce borrowers into unfavorable agreements.