A Money Lender’s License is required for enterprises in the business of money lending. So, if you are looking at this line of business, it is important to get a licence, otherwise you are operating an illegal business.
In the Fintech space, key money lenders with licences include KwikPay, KiaKia, RenMoney and Carbon (Payler) among other growing players in the segment.
Explaining why a licence is required, Legal experts at Pavestones stated that money lending outfits are regulated by the lending laws of the various states of Nigeria.
By the Lagos State Money Lenders’ Law, Pavestones said any person who lends money at an interest or who lends a sum of money in consideration of a larger sum being repaid will be regarded as a money lender until proven otherwise.
The legal firm observed that in the past few years, there has been an increase in the number of Fintech startups offering lending services to the public.
One reason for this increase, according to Pavestone is as a result of the need for individuals and small businesses to access loans where traditional loan institutions required cumbersome collateral and attracted prohibitive interest rates.
In contrast, Fintech startups offer loans at affordable rates with little or no collateral.
To offer such services, Pavestones stated that startups may register as Microfinance Banks or Lending companies-depending on the scope of their business operations.
To register as a money lender, there are three stages involved.
First, it involves applying to the magistrate court in the jurisdiction where the business operates, for a letter stating that the applicant is fit and proper in terms of character and disposition.
In applying for this, Pavestones stated that certain documents including a Police Clearance Certificate and the incorporation documents of the company must be submitted.
Subsequently, legal experts at the firm hinted that the magistrate will issue a letter to the Ministry of Home Affairs confirming due compliance and recommending the issuance of the money lending license certificate.
Then, the applicant company will fill the requisite forms, attach the necessary documents and pay the required fees to the Ministry.
Pavestones remarked that the final stage will involve a visit to the business premises of the applicant by officials from the Ministry who will inspect the premises and the officers of the company.
If the business has commenced operations, the legal firm stated that the visit will also involve an inspection of the company’s books.How to Get Money Lending License in Nigeria
If the officials are satisfied that the company has complied with statutory requirements, the applicant shall be issued the Moneylender’s License.
Meanwhile, Pavestones stated further that the licence is to be renewed every year upon expiry at the sum of ₦25,000.00
Elucidating on why it is necessary to register as money lender, Pavestones Legal firm stated that money lending comes with the risk of borrowers defaulting.
So, lenders have a recourse to the courts to compel defaulters to pay their debts. To receive protection under the law however, a money lender must have a valid license to ensure enforceability of loan agreements.