Last Updated on November 25, 2023 by admin
Moneylending has been a significant financial practice in Nigeria for centuries. It plays a crucial role in providing access to credit for individuals and small businesses who may not have access to traditional banking services. Moneylenders serve as an alternative source of funds, offering loans with flexible terms and quick processing times.
However, due to the potential risks associated with unregulated lending practices, the Nigerian government has implemented strict regulations to protect borrowers and ensure fair lending practices. Obtaining a moneylender license is now mandatory for individuals or institutions interested in engaging in moneylending activities.
This will delve into the process of registering as a moneylender and obtaining a license in Nigeria. We will explore the necessary requirements, legal framework, and steps involved in establishing oneself as a licensed moneylender within the country’s regulatory framework.
There are lots of Money lending business coming up nowadays in Nigeria, especially the online loan apps and other financial loan business, have you ever ask yourself the motive behind it?
I usually tell my friends that selling money is the best business because you make more profit. Though, there are lots of risk involve only if you can do your homework properly before given out loan to that customer that need the loan.
The practice of money lending has evolved over time and in the modern form is seen mostly by the banks. Although banks render credit facility services to consumers, this does not make them “money lenders”
In our today’s discussion, I shall work you through what you need to consider before disbursing loan and process to get your Money Lending License!
You can also read: How to apply for First Bank Home Loan and-mortgages & requirements
The Importance Of Obtaining A Moneylender License
In Nigeria, obtaining a moneylender license is crucial for anyone involved in lending money professionally. This license serves as proof that the moneylender operates within the legal framework established by the government. It ensures that borrowers are protected from unscrupulous practices and promotes transparency in financial transactions. One key advantage of obtaining a moneylender license is credibility. It instills confidence in potential borrowers, assuring them that they are dealing with a legitimate and trustworthy lender.
This, in turn, can attract more customers and enhance business growth. Furthermore, a moneylender license provides legal protection for both lenders and borrowers. Licensed moneylenders have clear guidelines to follow, ensuring fair lending practices and preventing exploitation of vulnerable individuals. Likewise, borrowers benefit from knowing their rights and having access to mechanisms for dispute resolution.
Eligibility Criteria For Registering As A Moneylender In Nigeria
To register as a moneylender in Nigeria and obtain a moneylender license, certain eligibility criteria must be met. First and foremost, the individual or entity seeking registration must be at least 21 years old. Additionally, they must possess a good character and reputation, ensuring that they have not been previously involved in any fraudulent or illegal activities.
Furthermore, applicants are required to have a minimum capital investment of N1 million for individuals and N5 million for companies. This demonstrates their financial stability and ability to operate as a moneylender.
In terms of educational qualifications, the applicant must have at least a secondary school certificate or its equivalent. This ensures that the individual possesses basic literacy skills necessary for conducting financial transactions.
Lastly, it is essential that the applicant has no previous convictions relating to dishonesty or financial misconduct. This criterion ensures that only trustworthy individuals are granted moneylender licenses in Nigeria, promoting transparency and protecting borrowers’ interests. AA
The Application Process For Obtaining A Moneylender License In Nigeria
Obtaining a moneylender license in Nigeria involves a comprehensive application process that ensures the credibility and legitimacy of the applicant.
The first step is to gather all the necessary documentation, including personal identification, proof of address, and financial statements. Additionally, applicants are required to provide details about their business structure, loan terms and conditions, as well as their proposed interest rates.
Once the documentation is complete, applicants must submit their application to the appropriate regulatory authority responsible for overseeing moneylending activities.
The regulatory authority thoroughly reviews each application to assess the applicant’s financial stability, integrity, and compliance with relevant laws and regulations. During this review process, applicants may be required to attend an interview or provide further clarification on certain aspects of their business operations.
It is essential for applicants to demonstrate a sound understanding of ethical lending practices and consumer protection measures.
How to obtain Money Lenders Licence in Nigeria ?
Before you can apply for a money lending licences you need to first register your company either as a limited liability LTD, business name or public liability company PLC.
To register a new company you need to obtain all the necessary licenses from the government, which can be done online without visiting the CAC office for registration.
1. Visit the Corporate Affairs Commission website on the following URL: http://new.cac.gov.ng/home/
2.Company Name Reservation
3.CAC1.1 Pre-Registration Form
4 Paying the Filing Fee and the Stamp duty fee
5 Document Scans (CAC1.1, MEMART, Proficiency certificate, Form of Identification for Director\s and Secretary, Stamp Duty Certificate, Evidence of CAC payment)
6.Uploading the documents mentioned above
7.Submitting the originals of these documents to a CAC office of your choosing.
How to Obtain a Moneylenders License
1.Submit an application to the Magistrate Court.
i Application letter
ii Certified Copies of the CAC Form 2 and 7 Memorandum and Articles of Association of the company Certificate of Incorporation
iii Tax and Police Clearance
iv Evidence of Maintenance of a current Bank account
Once you recieve your letter from migistrate court head up to stage two
i.Apply to the Ministry of Home Affairs and Tourism
ii.Make the payments of 10,000 Naira for the purchase of the Money Lender certificate and then Collect an invoice for a sum of 50,000 Naira from the Ministry.
The applicant shall submit the Application with the following documents
A covering letter
Tax clearance certificate
Form B and Form C from the Magistrate Court
Certificate of Incorporation
Evidence of payment of application fees.
Stage 3 – Visitation
– Inspection from the Ministry to the registered office address to investigate operations of the applying company. A successful pass of these three stages will guarantee the applying company a license permit.
Renewal of Money Lending License
Money lending Licenses issued by states has a one-year duration. The license must be renewed annually.
The requirements for the renewal of money lenders license
Application for renewal
Moneylenders ordinance (form B) from Magistrate Court
Duly completed and endorse (form C) from Chief Magistrate court
The previous license issued
Updated tax clearance
Evidence of payment of renewal fee.
Re-visitation and inspection.
What to consider Before given out loan
Before you give out loan as money lender, check the client character during your background check, fine out if the potential customer is a trouble maker, fine out if the person is a debtor
2. Give out loan to already existing business owner that must have been in business for more than one year and in a particular location for at least six months.
3. Make sure the business location is not against government restriction location like selling along the road at least the person should have a lock up shop in a good business location.
4. Ask the potential client his/her daily sales profit make sure at least 1/6 percentage of his/her daily sales or monthly sales profit will cover repayment
5.Make sure the person is the rightful owner of the business.you can carry out this findings by asking for the person nickname or popular name the client is known with then go on behalf of the client to do your proper findings. My experience as microfinance loan officer you get the best information that will help you evaluate the client.
6.Ask them for their daily, weekly, monthly expenditures like school fees, house rent, shop rent,feeding and other cost for cloths, party celebration and gift to family members.
This will help you determine if the loan amount will be reduce or increase. Work with repayment plan of 1/6 percentage of the client profit after expensive
7. Before concluding how much you will disburse to your client, ask them how much can they pay even when they go for “owanbe” celebration and party…. They will definitely tell you. Then carry out your judgement base on all this factors given.