With the rise of fintech start-ups in Nigeria carrying out the business of money lending, it is important that these start-ups understand and know the regulatory requirements guiding this line of business.
What does money lending mean in the real sense? Money lending simply put is the act of lending another person money for personal or business use for a duration of time at an agreed/specified interest rate. Money lending plays a very prominent role in the Nigerian system as it assists in providing finance for urgent needs. These needs can be business needs such as working capital, money to purchase assets, etc, or even personal needs such as rent fee, salary advance, etc.
Now, who is a money lender? Section 4 of the Money lending Law chapter 7 Laws of Lagos state provided the answer to this question. It provides thus;
“That an individual that lends money at interest or even who lends a sum of cash in consideration of a bigger sum being repaid shall be presumed to be a cash lender until the contrary is actually proven”.
Simply put, anyone who lends money to another at an interest rate or who expects a larger amount of money in return is a money lender. However, it is pertinent to note that when an individual or organization decides to begin a money lending business, a money lending license must be obtained from the relevant authority.
A money lending license can be described as an authority granted to an individual or an organization to carry on the business of money lending in Nigeria. A money lending license can be granted to a person or an organization whose sole business is lending money to people with the expectation of a higher amount in return. It is however very advisable to obtain a money lender’s license through a corporate body. There are various benefits of obtaining a money lenders license, one of them is the capability to exercise your rights in instituting an action in court to recover the principal sum and accrued interest in the case of a default. Another benefit is that it legitimizes the business and also prevents sanctions from the government.
Following the regulatory requirements guiding your business is the best way to protect your business legally. For instance, as a start-up money lender in Nigeria, if all regulatory guidelines regarding the business are followed, it would prevent a lot of things that might affect the business negatively.
Now, what are the requirements to obtain a money lending license?
- A cover letter on the company’s letter head with the company seal affixed to it
- Evidence of maintaining an office by the company.
- Certified True Copy of all Incorporation Documents
- CTC of Certificate of Incorporation of the Company
- Tax Clearance Certificate for applicant; in case it’s a newly registered business, then a proof that the business is actually a registered taxpayer.
- Three-year tax clearance for not less than two directors of the company
- Police Clearance Certificate for two directors of the company
- Reference Letter from a business bank
- Logo or Signage of the Company
- Evidence of payment of application fee (renewal fee in case of renewal).
- Passport photograph of the applicant and a means of ID.
- Police clearance for the company.
Procedure for applying for a money lender license in Lagos:
Register the business with CAC: Although this is not a compulsory process, however, it is very necessary and important. This would give the business the benefits of being a registered business or organization in Nigeria.
Apply to the Commissioner of Police, Lagos State Police Command. The application includes:
For a registered company;
- A Cover letter.
- Certificate of Incorporation of the company.
- Memorandum and Articles of the Company.
For an individual, an application letter and your valid means of identification will be required as well as your passport photograph.
This is to ensure that an investigation is carried out on the previous activities of the applicant. In the case of a newly registered Company, an investigation is carried out on the directors, to clear them of any criminal activities or any activities that may discredit their existence as moneylenders. After concluding her investigations, the Office of the Commissioner of Police issues a Clearance report either clearing the company or discrediting it as well as recommends the issuance of the license
Application to the Magistrate court in the magisterial jurisdiction in the state where the business would be situated with the following documents:
(1) Application letter directed to the Chief Magistrate court.
(2) Certified Copies of CAC form 2 and 7
(3) CTC of MEMART of the company
(4) Certificate of incorporation
(5) Tax and police clearance
(6) Evidence of Maintenance of a current account.
For an individual applying to the magistrate, your application should be accompanied with the following documents; tax clearance, evidence of maintaining a current account, and the police clearance report obtained from the command.
After the application has been submitted and upon approval, You would be issued with forms B and C of the money lenders ordinance by the Magistrate court. This is the money lenders certificate.
Application for the license at the Ministry of Home affairs and tourism of the Lagos state government.
The application to the ministry would be with the following documents:
- A Cover Letter on the company’s letterhead.
- Evidence of Payment of N25, 000.00 (Twenty-five thousand Naira) for the purchase of the Application Form. (Payment should be made into the Lagos State Government account. Invoice would be issued at the Ministry).
- A copy of the Certificate of Incorporation.
- Certified True Copy of all Incorporation documents.
- Police Clearance Certificate from the Special Fraud Unit, Ikoyi, Lagos State for the individual applicant or two directors of the company showing fingerprints.
- FORM B and FORM C (Original copy as received from the Chief Magistrate’s Court).
- Reference Letter from the applicant’s bank.
- Tax Clearance Certificates or Pay As You Earn (P.A.Y.E) Certificate for three (3) years for the individual or at least two directors of the company.
- Tax Clearance for the Company if it has been in existence or a proof that the business is a registered taxpayer in the case of a newly registered Company.
- Evidence of Payment of N200, 000.00 (Two Hundred Thousand Naira) for the registration of the Money Lender’s License fee. (Payment should be made into the Lagos State Government account. Invoice would be issued at the Ministry).
Inspection of the business premises by the appropriate officers. Officers from the ministry would be assigned to inspect the company. If the company has begun operations, the inspection team will visit the registered office of the applicant/company, inspect the activities log/books, the premises, and question the staff of the applicant/company in line with their observations and the applicant’s business activities. If the Company is yet to resume business, the office premises and officers of the Company would satisfy demands.
Upon inspection, the inspection team submits its report and the Money Lenders License would be issued.
The expected period of completion depends on when the officials decide to come for the investigation. It shouldn’t be long after the inspection.
Note that the license is renewed yearly.
As easy as these steps seem, it is advisable to engage the service of a lawyer to undertake this process for you to ensure that the process is seamless and hassle-free. Engaging the services of a legal practitioner would reduce the risk of committing errors in this process.
This is where I come in, I assist in the processing of money lenders license in Lagos for individuals and corporate organizations.
You can easily reach me on 07030446925.