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  There’s a big market for the lending business in Nigeria. While there are numerous banks offering loans to individuals and companies, these financial institutions aren’t able to serve a majority of people and entities that seek access to credit. And that’s a gap that money lending companies exist to fill.
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Money lending is often quite lucrative (returns are based on interest paid on loans). It’s also not subject to many of the stringent rules that regulators have set for banking institutions. Starting up requires much less capital than other formal lenders need to muster. Overall, it’s an attractive option for people and organizations that want to meet the widespread need for capital.

Facts You Should Take Note Of

If you’re attracted to the idea of setting up a money lending business, you will have to obtain a license to start. However, the requirements for getting this license differ across states. Here, we’ll be discussing the requirements for setting up in Lagos State. The minimum share capital of a money lending business is ₦20 million. This rule exists to ensure that only entities with sufficient capital are able to venture into the lending business.

Steps To Setting Up A Money Lending Business

These are the steps you can take to start a money lending business in Nigeria.

Register With The Corporate Affairs Commission (CAC)

The CAC is responsible for the legal registration of businesses in Nigeria. If your business is going to be considered a legal entity, you will have to register it with them. Documents from the CAC will also be useful in the subsequent steps to obtaining a money lender’s license. Find out how to register a business with the CAC in our article, How to Register Your Business With the Corporate Affairs Commission (CAC).

Apply To The Magistrate Court In Your State

Having registered with the CAC, your next step would be to write a formal application addressed to the Chief Magistrate. It should have your company’s letterhead on it. Submit your application along with these documents:
  • Certificate of Incorporation (from the CAC)
  • Memorandum and Articles of Association (MEMART) of the company
  • Certified copies of the company’s statement of share capital and director’s particulars
  • Evidence of maintenance of a current bank account
  • Tax and police clearance
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After submitting these documents to the Magistrate Court, you will be provided with the following:
  • Form B and C of the money lender’s ordinance
  • A letter from the Chief Magistrate Court Registry addressed to the Permanent Secretary, Home Affairs, recommending that you be issued with the money lending certificate

Apply To The Ministry Of Home Affairs And Tourism

When applying to the Ministry of Home Affairs and Tourism, you will be expected to pay ₦10,000 to obtain the money lender’s certificate and collect an invoice of ₦50,000 from the ministry. The next step would be to submit your application along with these documents to the ministry:
  • Forms B and C of the money lender’s ordinance (from the Magistrate Court)
  • Evidence of payment of application fees
  • Certificate of incorporation
  • Tax clearance certificate for the past three years
  • PAYE Certificate
  • A police report from the commissioner of police

Prepare for Inspection By The Government

Government officers from the Ministry of Home Affairs and Tourism will inspect your premises and operations. And if you are already in business, they will examine your financial records. If they are satisfied with what they see during the inspection, they will issue you with a money lending license. This license indicates that your money lending business is legally recognized. Note that you will be required to renew your license annually.

Start Lending

There’s a lot that needs to be done on your part after securing a license. For example, you’ll have to market your business to the public, especially the sort of audience that may need your services. Set up a website that’s Search Engine Optimized, so that it’s visible to people looking for money lenders online. Build a strong presence on social media, and promote your business offline as well (you could use leaflets, posters, and business cards). Depending on the kind of operations you want to run, you may leverage technology to reach people beyond your state. They could access your services via a digital platform you’ve built for that purpose. When potential clients begin requesting loans from you, make sure to conduct thorough background checks on them before agreeing to lend to them. Your decision to lend should be based on their ability to pay, as indicated by their income or revenue streams, and their credit profile (which you may ascertain through their account statements).

Final Words 

There’s a growing interest in the money lending business in Nigeria. Segments of the country’s population (whether they’re individuals or organizations) that are unable to access loans from banks are turning to other money lenders to meet this need. With the right knowledge and resources at your disposal, you can tap into the growing market for credit, and reap great returns from it. Featured Image Source: Primecooperative
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This article was first published on 19th October 2021

ikenna-nwachukwu

Ikenna Nwachukwu holds a bachelor's degree in Economics from the University of Nigeria, Nsukka. He loves to look at the world through multiple lenses- economic, political, religious and philosophical- and to write about what he observes in a witty, yet reflective style.

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