Lending is a profitable business whose economic significance can’t be disregarded. There are a few hurdles to scale to become a lender and getting a moneylenders license is one of them. Lenders need to be licensed, if not, they can’t start a money lending business legitimately. You can read more about how to determine the type of lending license you need.
However, we’ll focus on the requirements for obtaining a moneylenders license in this article for those who want to lend strictly without offering other banking or financial services.
A moneylenders license is issued by the state you wish to set up shop in and each state has their own procedures. We’ll make reference to the Moneylenders Law of Lagos State here which regards a money lender as “any person who lends money at interest or who lends a sum of money in consideration of a larger sum being repaid shall be presumed to be a moneylender until the contrary can be proved”. So if this is what you do, the answer to whether or not you need a license to lend (in case you’re still wondering) is yes.
Here are five documents you’ll need to be able to start a money lending business in Nigeria:
Certificate of incorporation
This is issued by the Corporate Affairs Commission in Nigeria to show that your business has been duly registered in accordance with the law. This certificate basically says that the law recognizes your business exists and grants you a right to do business. The Registrar of Companies must sign the certificate of incorporation. This can be issued at incorporation, in case of an official company name change or re-registration.
Businesses that fall into the categories of incorporated trustees, private limited and unlimited; and public limited and unlimited companies qualify for a certificate of incorporation. This certificate is valid for as long as the company is still in operation.
CAC form 2 and form 7
This is another important requirement to get a moneylenders license in Nigeria. The CAC form 2 is the statement of share capital and return of allotment of shares for the company which must be signed by at least one director. The CAC form 7 contains the list and particulars of directors (at least 2). It should also contain their consent as first directors of the company. You can read more about CAC forms.
These forms are provided by the Corporate Affairs Commission under the provisions of the Companies and Allied Matters Act (CAMA).
Memorandum and Articles of Association (MemArt)
These are legal documents that regulate both external (memorandum of association) and internal (articles of association) affairs of the company. Together, they make up a sort of constitution for the company.
On one hand, the Memorandum of Association contains the object of the company (what the business is about), its registered address and details of the extent of shareholders’ liability. On the other hand, the Articles of Association details the rights and duties of members of the company, as well as how internal affairs should be managed. You are expected to prepare these yourself and present to the Corporate Affairs Commission at incorporation. You need these to get your license to lend.
Tax clearance certificate
This is a document issued by the Federal Inland Revenue Service (FIRS) to signify that your business doesn’t owe any taxes and all applicable taxes have been paid off. It’s issued to cover a period of three years in arrears. This means you should have paid taxes over the last three years to be eligible. However, a new company can still obtain a tax clearance certificate. “NIL” will be indicated to show that there are no outstanding taxes from before the start of the company.
Each director will have to obtain their own tax clearance certificate. The State Inland Revenue Service issues this to individuals. In this case, that’ll be the Lagos Internal Revenue Service (LIRS).
Police clearance certificate
The Commissioner of Police issues the police clearance certificate. This is also known as the certificate of good conduct. It attests to your character and the character of other directors in the business. It certifies that you have no criminal record or pending crimes to answer for.
These are the documents needed to proceed with your application for a moneylenders license. If you’re still unsure about how to proceed, you can reach out to firstname.lastname@example.org for more information.