Can I use a state money lending license to lend anywhere in Nigeria?

As a lender new to the game, one of the foremost questions you’re likely to have is how possible it is to use a state money lending license to lend anywhere and to anyone in Nigeria, especially with the rise of digital lending. Now, let’s shed more light on this particularly vital question.

The state money lending license laws were formulated at a time when digital lending was not a consideration. Unfortunately, this means no state in Nigeria boasts a modern license law tailored to digital lending. But with the widespread adoption of digital lending, lenders are left scratching their heads about where their state license holds up.

The big question and the double-edged answer

Let’s take an example of a lender with a Lagos state money lending license. The big question is whether the Lagos license grants them the privilege to extend their lending operations to individuals residing in other states, such as Abia state.

However, the answer is nuanced – a bit yes, a bit no, depending on how you look at it.

Why you’re limited: Physical constraints

From a physical standpoint, the limitations imposed by a state money lending license are evident. If your loan business is licensed in Lagos, your operational jurisdiction is confined to that state. The license dictates that you can only establish a physical office within the geographic boundaries of Lagos, making it impractical to set up shop elsewhere. 

Why you’re not limited: Digital freedom

On the flip side, the advent of digital lending has redefined the rules. The restrictions imposed by physical boundaries are rendered obsolete. If you lend via web or mobile apps, then you can automatically extend your services across Nigeria without the need for a physical office in each state.

However, kindly note that this degree of freedom ends within the Nigerian border. You cannot lend to customers in other countries as you would run afoul of numerous financial laws across different borders. 

Taking a page from regional banks

Consider Providus Bank, a regional bank with the capability to open and manage accounts for individuals nationwide. While their physical presence is confined to specific regions of Nigeria, the digitalization of the financial ecosystem allows them to transcend geographic constraints, offering banking services to clients across the entire country.

What’s the takeaway?

State money lending licenses were made for a time before the digital revolution. Now, lenders need to figure out how to play by the rules set in the past while riding the wave of digital opportunities and Lendsqr can help you get started. Get started on your journey as a digital lender. Send us a message at growth@lendsqr.com, and we’ll be more than happy to answer your questions.