The online money lending license in Nigeria is usually issued by a state government or Federal Capital Territory (FCT). There are 36 states and FCT and most of them are empowered by state laws to issue lending licenses. Money lending now often referred to as digital lending is entirely regulated by various state laws.
In recent years, Nigeria has experienced significant advancements in internet technology, leading to the growth of various online services, including online money lending. These advancements have transformed the financial landscape in the country, providing easier access to credit and financial services for individuals and businesses.
WHO REGULATE ONLINE MONEY LENDING IN NIGERIA?
In Nigeria, money lending is primarily regulated by the various state governments and the Federal Competition and Consumer Protection Commission (FCCPC). These regulatory bodies play significant roles in ensuring that money lending activities are carried out in a fair and transparent manner, protecting the interest of borrowers, and maintaining stability in the financial sector.
The Central Bank of Nigeria also regulates finance companies, which engage in various financing activities such as equipment leasing.
REQUIREMENTS FOR MONEY LENDING LICENSE
The requirements for a money lender license vary from state to state. However, the requirements for obtaining money lending licenses in Lagos State will be summarized below.
Requirements and procedure for obtaining a Money Lender's License in Nigeria (Lagos State)
- Certificate of company registration and other incorporation documents
- A police fingerprint certificate of the two directors of the company.
- An application in the prescribed form to the Chief Magistrate within the Magisterial District where the lending business will be carried on. The application will be accompanied by the incorporation documents of the company and all other relevant documents.
- Upon successful application to the Chief Magistrate, the applicant will be issued a Money Lenders Certificate (Form B) recommending the issuance of a Money Lenders License.
- A formal application to the Lagos State Ministry of Home Affairs and Tourism attaching all relevant documents.
- Applicant must make payment of the Money Lender Lenders License fee into the Lagos State Government Account with receipt evidencing payment.
- The company must have a banner conspicuously displaying the business activities of the company, which is money lending services and the company's vision.
- The three-year tax clearance certificates for the two directors of the company.
- Banker reference letter addressed to the Permanent Secretary, Ministry of Home Affairs
- The Lagos State government officials will physically inspect the applicant's place of business.
- Upon compliance with the statutory requirements and upon satisfaction by the government officials from the Ministry of Home Affairs & Tourism, the applicant will be issued with the Money Lending License.
- Every money lending license issued expires by December 31 of the same year it is issued.
The Federal Government through the Federal Competition and Consumer Protection Commission (FCCPC) now mandates all companies engaging in money lending business activities to register with FCCPC for a permit before the commencement of a business operation. The FCCPC registration, which commenced in the year 2021 was informed by the unlawful collection of data and abuse of privacy rights of loan defaulters by various money lending companies, which were sending defamatory messages concerning their customers to third parties and the public. The FCCPC laid out several requirements and conditions to register a money lending company. The requirements and steps for registering with the FCCPC will be summarily discussed below.
- Company Registration Documents: Every money lending company operating in Nigeria must be registered with the Corporate Affairs Commission (CAC). Money lending activities must be included in the objectives of the company. A lending company seeking an FCCPC registration must provide its incorporation documents and details of its officers and beneficial owners.
- Registration with the Money Lending Association of Nigeria: before submitting for FCCPC registration, a money lending company must register with the Money Lending Association of Nigeria.
- Data Auditing and Evidence of Compliance: before a registration application can be submitted to the FCCPC, the commission mandates all lending companies to engage in the data auditing process and obtain evidence of compliance from the Nigeria Data Protection Commission. Consequently, every lending company is required to appoint a Data Protection Compliance organization (DPCO), which shall train the company on the importance and management of data.
- Application for Registration with FCCPC: under the Federal Competition and Consumer Protection Commission (FCCPC) Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending, 2022, online money lenders companies must provide the following requirements for registration with the FCCPC.
- Certified copy of the certificate of incorporation of the company.
- A brief description of the business of the Applicant and where relevant, their groups.
- Organogram showing role players and location of key role players and any operational approving authorities/person.
- Name and address of a person within the business who is authorized to accept all correspondence and accept service on behalf of the business.
- Evidence of membership in any trade or professional associations.
- Any service level agreements with any service providers with respect to operations but excluding administration.
- Evidence of feedback and complaint resolution mechanism
- Evidence of tax payments or tax waivers where applicable
- Evidence of data audit and Data Protection Impact Assessment (DPIA).
- All applicable fees associated with service; and
- A duly signed FCCPC INTERIM DIGITAL LENDING GUIDELINES FORM 002 – Declaration for Digital Lending Businesses in Nigeria.
RENEWAL OF MONEY LENDER LICENSE
By law, any issued money lender license must expire by December 31 of the year of issue or within one year after issuance. Therefore, a money lender license must be renewed annually.
To renew a money lender lending license in Lagos State, the requirements are as follows:
- Application for renewal.
- Money lenders ordnance (Form C) from Chief Magistrate Court.
- Duly completed and endorsed (Form C) by the Chief Magistrate Court.
- The Previous license issued
- Updated tax clearance.
- Evidence of payment of renewal fee.
- Re-visitation and inspection.
In closing, with the significant advancements in internet technology in Nigeria, online money lending has in recent times in rising with the emergence of various mobile applications offering non-collateral backed loans to the public. The rise in online money lending in Nigeria on various mobile applications is also traced to the fact that there is no specific law currently in Nigeria restricting any online business as such. Therefore, a money lending business has now moved from traditional retail shop lending to a more organized online business. However, it is important for any company seeking to engage in online money lending to first incorporate a company in Nigeria, obtain a money lender license from a relevant state authority and duly register with the Federal Competition and Consumer Protection Commission (FCCPC) in order carry on business legitimately.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.