Money lending in Nigeria involves providing loans to individuals or businesses, usually with interest, especially to those who may not qualify for traditional bank loans. In Nigeria, private lending companies are regulated by the Money Lending Law of the various States of the Federation. To operate a money lending venture, you must obtain a license from the Ministry of Home Affairs and the Magistrate Court in the state you intend to operate.
Starting a private lending company in Nigeria can be profitable, but it requires legal compliance and careful planning. Operating without a moneylender’s license can lead to legal consequences, including fines and imprisonment. So you must engage the services of a lawyer to ensure your business complies with state regulation.
In this article, we have highlighted the procedures for starting a private lending company in Nigeria. But first, who is a money lender?
Definition of Money Lending
According to the Lagos State Money Lenders Laws, “Money Lending includes every person whose business is that of money lending or who carries out or advertises or announces himself or holds himself to anyway as carrying on business, whether or not he also possesses or owns property or money derived from sources other than the lending of money and whether or not he carries on businesses as a principal or agent”.
However, the following entities do not qualify as money lenders:
- Cooperative societies registered under the Cooperative Society Law;
- Statutory corporations authorized by law to lend money;
- Banks, insurance companies, or other licensed businesses that lend money as part of their operations;
- Licensed pawnbrokers.
Under Nigerian law, it is illegal to operate a money lending business without the necessary government license. Anyone involved in money lending activities will be presumed to be a Money Lender and held liable under the law.
How to Start a Money Lending Business in Nigeria
Here is a simple guide to help you get started:
1.Register a Company with the Corporate Affairs Commission (CAC)
The first step to starting a Money Lending company in Nigeria is to register a limited liability company with the Corporate Affairs Commission (CAC). For a Nigerian-owned money lending company, the authorized minimum share capital required is N20 million with at least two (2) directors. However, if it is foreign-owned, the company must have a minimum of N100 million in share capital.
Also, the company’s Memorandum of Association must clearly describe that its objective is limited to money lending services, otherwise, it will be rejected. Therefore, it is best to engage the services of a corporate lawyer to help you register your company with the CAC. They will ensure that the business structure, object clause, and other legal requirements are properly met.
2. Obtain Police Clearance from the Police Station
The next step is to make a formal application to the Commissioner of Police for the issuance of a Police Clearance Certificate for the directors. The certificate is issued after conducting a thumbprint verification on at least two directors of the proposed company.
This certificate will confirm whether or not the directors have records of criminal activities or convictions that could affect their credibility. criminal conviction. If none of the directors have been convicted, the report will be issued clearing the company for the issuance of the money lending license.
3. Make a Formal Application to the Magistrate Court
Thirdly, submit an application to the Chief Magistrate of the Magisterial District where your business is located. The documents to be accompanied by the formal application include the following:
- A cover letter with the company’s seal attached.
- Certificate of Incorporation of the Company.
- The office address of the individual or corporate applicant.
- Certified True Copy of the CAC registration Forms.
- Memorandum and Articles of Association of the proposed lending company.
- Three years Tax Clearance of the proposed private lending company and at least two directors. For a newly registered company, there must be evidence that the company is a registered taxpayer.
- Police clearance certificate from the Commissioner of Police for two (2) directors.
- Bank reference letter from the applicant’s bank.
If the application is approved, a Money Lending Certificate Form B & C will be issued by the Chief Magistrate, along with a letter addressed to the Permanent Secretary of the Ministry of Home Affairs, confirming compliance and recommending the issuance of the Money Lending License.
4. Make a Formal Application to the Ministry of Home Affairs
Next, make a formal application to the Ministry of Home Affairs and Tourism, attaching all the documents listed above, including the following:
- A formal application letter to the Ministry of Home Affairs and Tourism.
- Evidence of payment of application fee into the Lagos State Government Account.
- Money Lending Ordinance (Form B), issued from the Magistrate Court.
- A duly completed Magistrate Form C.
5. Inspection Inspection
The final step for starting a private lending company is the visitation and inspection carried out by government officials from the Ministry of Home Affairs. On a scheduled date, they will visit to inspect the premises, meet with the company’s officers, and review books and records if operations have already begun.
Your company must also display a banner at its premises to indicate that it operates in the business of money lending. Once the officials are satisfied that all legal requirements have been met, a Money Lender License will be issued. The license is valid for one year and expires on the 31st of December of the year it was issued, to be renewed annually.
Consult a Corporate Lawyer to Start Your Lending Company Today!
Today, money lending plays a huge role in Nigeria’s financial system to help offer quick and flexible financial solutions to people. However, obtaining a money lending license can be a complicated process without the help of a lawyer. By following the steps highlighted above, you can streamline the process to be easy. Ultimately, we recommend that you engage our law firm to obtain the license on your behalf.