How to get a lending license in Sierra Leone

If you operate without a lending license in Sierra Leone, you shall be punishable by a fine not exceeding Le5,000,000, or by imprisonment for a term not exceeding 180 days, or both. 

But, that’s not the only reason why you need one, right? 

Predatory lending thrives in markets with no regulation. While there may be limited documented cases in Sierra Leone, it would be naïve to think it didn’t happen. 

With 80% of the population financially excluded from formal banking services, turning to informal lenders becomes the only option for many. And in an unregulated environment, their needs are easily exploited.

It’s not just borrowers who benefit when lenders follow the rules—lenders gain too. By working within a framework, lenders reduce risk, build trust, and position themselves as legitimate players in a maturing market. 

That’s why the Bank of Sierra Leone stepped in with the Other Financial Services Act of 2001, which was then amended in 2007—to bring order to a chaotic system where borrowers were at the mercy of unchecked lenders.

Following the rules and meeting the licensing requirements is the first step in positioning yourself as a credible lender. One that the millions of financially excluded Sierra Leoneans can trust to help them in their time of need, knowing they won’t be exploited.

So, here’s how to become a licensed entity in Sierra Leone:

Under the Other Financial Services Act of 2007 in Sierra Leone, entities seeking to operate as Non-Bank Financial Institutions (NBFIs), which covers entities like microfinance institutions, money lenders, and other credit providers, must adhere to specific licensing requirements and procedures established by the Bank of Sierra Leone (BSL).

1. Application requirements:

Prospective NBFIs must submit a written application to the Bank of Sierra Leone (BSL), detailing the nature of the financial services they intend to offer.

The application should include certified copies of the Certificate of Incorporation, Memorandum and Articles of Association, and information about significant shareholders, directors, and executive officers.

A comprehensive business plan outlining proposed activities, financial projections, and risk management strategies is required.

Applicants must pay the prescribed non-refundable application fee as stipulated by the BSL.

2. Capital requirements:

Applicants must show compliance with the minimum paid-up capital requirements specified by the BSL, for their financial stability and capacity to operate effectively.

3. Fit and proper assessment:

The BSL will assess the character, competence, and experience of the proposed directors and executive officers to ensure they meet the necessary standards for managing a financial institution.

4. The review you’ve been waiting for:

The BSL will review the application and make a decision within a specified timeframe. Applicants will be notified in writing of the approval or refusal, with reasons provided for any refusal.

5. Post-approval requirements:

Upon approval, the applicant must display the financial services license at its head office and all branches. The BSL will also publish a list of all licensed entities.

What could make you lose your lending license in Sierra Leone?

Under the Other Financial Services (Amendment) Act, 2007 of Sierra Leone, the Bank of Sierra Leone (BSL) holds the authority to revoke the license of a Non-Bank Financial Institution (NBFI) under specific circumstances. The primary grounds for revocation include:

1. Not complying with the regulations: Failure to adhere to the stipulations outlined in the Other Financial Services Act, 2001, as amended in 2007, or any other directives issued by the BSL.
2. Providing false or misleading information: Submitting inaccurate or deceptive information during the application process or in any mandatory submissions to the BSL.
3. Having unsafe and unsound practices: Conducting business in an unsafe manner can ruin your company’s financial stability or pose risks to clients and the public.
4. Involving yourself in crime: Participation in illegal activities such as money laundering, financing of terrorism, or other criminal offenses.
5. Operational misconduct: Operating in a way that is detrimental to the interests of clients or the public, including unethical practices or violations of consumer protection laws.

The Central Bank has grounds for refusing an application as well

The Other Financial Services (Amendment) Act of 2007 outlines several reasons why the Central Bank of Sierra Leone might reject a lending license application:

If you have ever been declared bankrupt, your application will be rejected. So that anyone running a lending business is financially stable and capable of managing a financial institution responsibly.

If you have been convicted of any crime involving fraud or dishonesty, the Central Bank will not grant youa license. This includes convictions within Sierra Leone or anywhere else.

Specifically, if you have been convicted of a crime under the Anti-Money Laundering Act of 2004, this would also be grounds for rejection. The Central Bank wants to ensure that only people with clean records and ethical backgrounds can lend money.

The Central Bank will look into your qualifications and work experience. If you don’t have the necessary education or relevant experience to effectively run a lending business, their application will be refused. This is to make sure only competent people are granted a license.

The Central Bank also assesses your reputation and character. If you’re found to be of bad character or has a poor reputation, this will lead to a refusal. The bank needs to trust that the individual will act responsibly with the public’s money.

Beyond just qualifications and reputation, if the Central Bank thinks that you cannot do the job honestly, efficiently, or fairly, they will not issue the license. The applicant must show that they are capable of acting ethically and can manage a lending business properly.

The process might be rigorous, but it’s worth it

Not only does a license give you the authority to lend, you also earn the trust of the people and regulators. It shows you are a serious lender, ready to do things the right way, under the watchful eye of the BSL.

But a license is only the first step, you will need a powerful loan management system. Good thing we have one for free.