In my previous article (Available Fintech licenses in Nigeria), i briefly spoke about the business of Moneylending and some of its basic requirements.
What this article will thus be aiming for is to go in-depth by dealing in detail with the topics of:-
– What the Legal definition of a Moneylender is.
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– The Regulatory Framework governing the business of Moneylending in Nigeria.
– The licensing requirements for Moneylending in Nigeria(with a focus on Lagos & Abuja).
– What activities can be engaged in /cannot be engaged in by Moneylending businesses.
What is the Legal definition of a Moneylender in Nigeria?
A Moneylender is defined as a business engaged in cash loans in exchange for a bigger repayment sum consisting of the principal loan sum and accrued interest.
Some laws in Nigeria such as the Moneylenders Law of Lagos State define a Moneylender as an individual who lends money at interest or even anyone who lends cash in consideration of a larger repayment sum being repaid until the contrary is actually proven.
What is the Regulatory Framework governing the business of Moneylending in Nigeria?
Moneylending as a business is governed by State Governments through their respective Moneylending Laws in collaboration with the Magistrate Courts of a state.
What is the effect of operating as an unlicenced Moneylender?
Apart from possibly committing an offence, an unlicenced Moneylender cannot exercise a right in Court or anywhere else legally for the repayment of Principal loan sums and accrued interests from borrowers in default of their loan obligations.
Can Moneylenders operate Nationwide?
No, they cannot as Moneylending is licensed by State governments, so anyone seeking to operate nationwide will have to register as a Moneylender in each state where it intends to operate or secure a Finance company license from the Central Bank of Nigeria.
Can a Digital Moneylender operate nationwide?
Technically, yes. This is because digital transactions are borderless and can be construed legally as taking place in the state where the digital company is based physically. However, it is advisable that a Fintech company seeking to render digital lending services Nationwide enters into a Technical partnership or Joint Venture or Service level agreement with either a Finance Company or National Microfinance Bank.
Are Moneylending licenses renewable?
Yes, Moneylending licenses are annually renewable.
Can individuals operate as licensed Moneylenders in Lagos State?
No, anybody seeking a Moneylending license in Lagos will have to do so as a Registered Company or a company in the process of being registered.
Are all lending businesses described as Moneylenders under the Moneylending Laws of states in Nigeria?
No, exceptions do exist. The definition of a Moneylender under the Moneylending Law of Lagos State for example, bars the following from being regarded as Moneylenders :-
– Cooperative Societies.
– Any Statutory corporation empowered by Law to lend money.
– Pawnbrokers.
– Banks or other licensed Financial/Lending Institutions.
What is the procedure for obtaining a Moneylending license in Lagos and Abuja?
LAGOS
The procedure for obtaining a Moneylending license in Lagos State is as follows:-
– instruct your lawyer to make a formal application for a police clearance report to the state Commissioner of Police along with an attached copy of the company’s Certificate of Incorporation, the company’s MEMART (Memorandum & Articles of Association) and other required CAC forms (especially the CAC forms for the particulars of directors and shareholders);
– securing the thumbprints of the director’s of the company for the purpose of issuing a Police clearance report;
– get your lawyer to make another application for the Magistrate Court in the district where the business is located for a Magistrate’s Ordinance Form B & C, which will be forwarded to the Ministry of Home Affairs confirming due compliance on the part of the license applicant and recommending the issuance of the Moneylending license;
– get your lawyer to make yet another formal application to the Ministry of Home Affairs for a Moneylending license;
– pay the required fees for the license grant to the Lagos State Government(the receipts should be attached to the application to the Ministry of Home Affairs);
– upon the consideration of the application and other submitted supporting documents, a physical inspection of the Moneylending company’s offices by officials from the Ministry of Home Affairs will be carried along with an inspection of the company’s books where the business has already started the business of Moneylending.
– a formal grant of the Moneylending license.
ABUJA
– secure through your lawyer a Police character clearance for the direcrors of the company;
– get your lawyer to prepare an application for a Moneylending license to be submitted to a Chief Magistrate’s Court;
– attach to this application all relevant CAC(Corporate Affairs Commission) documents;
– attach also a general form affidavit that the company is not in debt alone with Tax clearance certificates of the directors and the company;
– the Court in Abuja is also responsible for the issuance of Moneylending licenses and in Abuja, physical office inspections are not required.
It should be noted that these requirements and procedures are subject to change by the relevant Regulatory Agencies.
What is the procedure for Moneylending license renewal?
To renew a Moneylending license (in this case in Lagos), you need to submit the following:-
– a license renewal application by your lawyer;
– a Moneylender’s Ordinance (Form B) & duly completed Form C from the Magistrate Court;
– The previous license issued to the Moneylender;
– evidence of payment of the Moneylending license renewal fee;
– an updated Tax clearance certificate of the company;
– a revisitation & physical inspection of the Moneylending company’s office by officials of the Ministry of Home Affairs.
How long does it take to process an application for a Moneylending license?
It takes an average period of 8 weeks (2 months) to process a Moneylending license application.
Can i commence Moneylending activities while my license application is being processed?
Yes you can, as long as you have registered a Moneylending company under the Corporate Affairs Commission and you diligently follow-up and complete your license application and attend to any queries that might be issued by the relevant Regulatory agency.
What are the minimum capital and license fee requirements for Moneylending companies?
Moneylending companies seeking to be registered with the Corporate Affairs Commission must have a minimum share capital of 20 Million Naira. Please note that this amount is not to be paid to the Corporate Affairs Commission or Ministry of Home Affairs or Magistrate but is simply a statement that the Moneylending company has a share capital of that amount that shall be proved by paying a filing fee of around 10 Thousand Naira for every 1 Million Naira of the company’s share capital statement minus stamp duties which will amount to about 300 Thousand Naira in Incorporation costs minus Legal fees.
In Lagos, Moneylending license applicants will then be required to pay to the Ministry of Home Affairs an license application fee of 25 Thousand Naira and a License registration fee of 200 Thousand Naira along with an annual renewal fee of 100 thousand Naira
Conclusion :- It is hoped that a clearer understanding of the Regulatory Framework governing the licensing and operation of Moneylending businesses has been acquired by the above write-up even though it is not exhaustive and does not cover the licensing requirements in other states of Nigeria apart from Lagos and Abuja. It is thus necessary to further consult your lawyer further if you’re seriously interested in delving into this type of business.