Doing digital lending business in Nigeria generally requires an operational licence that must be renewed annually in addition to fulfilling other regulatory compliance obligations if the company must remain compliant with the law. In Lagos State, for example, a company cannot operate a business of money lending in any part of the state without a money lender licence issued by the Ministry of Home Affairs (the “Ministry”) and a money lender certificate of a Magistrate’s Court of Lagos State. Both the certificate and the licence, once issued, are valid for one calendar year, i.e. January 1st to December 31st.
Please note that irrespective of the month of issuance of the certificate and licence, they expire by 31st of December of the year of issuance.
At the end of every calendar year, every digital money lending company is required by law to apply to a Magistrate’s Court of Lagos State and the Ministry of Home Affairs for renewal of its money lender certificate and licence before their expiration.
We have highlighted, in a question-and-answer format, some key points that may be useful for digital lenders to help them in staying on the side of the law.
YOU CAN READ ALSO:
- HOW TO SET UP A DIGITAL LENDING COMPANY IN LAGOS
- HOW TO SET UP A DIGITAL LENDING BUSINESS IN KENYA
- HOW TO SET UP A DIGITAL LENDING COMPANY IN RWANDA
- HOW TO SET UP A DIGITAL LENDING COMPANY IN GHANA
1. What are the requirements for renewal of a money lender licence in Lagos State?
The procedure for renewal of a money lender’s licence is the same as the process for getting the first licence except that some of the requirements for the first licence may change or be dispensed with. In actual fact, every application for renewal of licence is an application for issuance of a new licence.
The requirements for renewal of money lender licence in Lagos State are as follows:
i. Application for licence renewal;
ii. Police Clearance Report of the Directors of the company (this report expires after six months, so a new report is required for renewal of money lender certificate and licence);
iii. Money Lender Certificate of a Magistrate Court (this certificate expires after one year, so a new certificate is required for renewal of money lender licence);;
iv. 3 years’ Tax Clearance Certificate of the company and its directors;
v. Photocopy of previous money lender licence(s);
vi. Audited Statement of Accounts for the preceding six months;
viii. Evidence of remittance of Employee’s tax (Pay As You Earn) to the Lagos Inland Revenue Service (LIRS);
ix. Proof of payment of renewal fee;
x. Immigration permits such as business permit (for a foreign owned loan company), Combined Expatriate Resident Permit and Alien Card (“CERPAC”), Quotas Returns and Expatriate Tax Assessment; and
xi. Proof of the company’s signage is well displayed within the loan company’s premises.
2. Is office inspection a mandatory requirement before renewal of licence?
Just like it is a condition for the grant of the first operational licence, office inspection is a mandatory requirement for the renewal of a money lender licence in Lagos State. The managing director and the key management staff are required to be present during inspection to answer questions on the business operations, records and recovery practices. Please note that a roll-up banner of the digital lending company must be compliant with regulatory requirements and conspicuously displayed in the office of the digital lending company.
3. Are there key questions to expect from the regulators during office inspection?
Yes. There are some key questions to expect from the inspection team during the office inspection interview though these questions are mainly based on transaction volume, interest rate, default rate, recovery practices and sundry issues. Some of the questions are as follows:
i. What challenges has the company encountered since it commenced operations?: This is an open-ended question to elicit a wide range of information that can provide insights into the operational experience, procedures, processes and practices. Depending on what answer the company provides to the foregoing question, some follow-up questions may be expected.
ii. How much has been disbursed in the last one year?: This is simply about the loan transaction volume that has been processed by the company in the entire year. This information is useful to the regulator in many ways and may be deployed for planning, regulation and calculation of tax, amongst others.
iii. What is the minimum and the maximum disbursement within this period?: This is to understand the range of loan amount that has been processed.
iv. At what interest rate have these disbursements been made?: This is a compliance question. The interest charged by the company must not exceed the official interest rate approved by the government.
v. Who is your target audience?: Money lenders are encouraged to focus on unbanked people, low income employees and small businesses.
vi. What is the default rate on loans and what are your recovery practices?: This information is required for regulatory planning, compliance and other purposes.
vii. What is your staff strength?: The number of employees of a company determines what brackets it falls in terms of rating, taxation, benefits, etc.
viii. Do you have a statement of account? The company may be required to furnish the Ministry of Home Affairs with a copy of its Statement of Account for the preceding six (6) months. Where the officials are satisfied with the state of the company and its operations, a new licence will be issued to the company for it to continue its operations.
In our experience, the inspection interview may last between 5 to 20 minutes.
Thereafter, a money lender licence may be renewed within 4 – 6 weeks after the inspection team.
You can read more on Renewal Of Money Lender Licence In Nigeria here
YOU CAN READ ALSO:
- HOW TO SET UP A DIGITAL LENDING COMPANY IN LAGOS
- HOW TO SET UP A DIGITAL LENDING BUSINESS IN KENYA
- HOW TO SET UP A DIGITAL LENDING COMPANY IN RWANDA
- HOW TO SET UP A DIGITAL LENDING COMPANY IN GHANA
*************************************************************************************
About KORIAT & CO.
We are a commercial law firm in Nigeria with network of lawyers and consultants in Ghana, Kenya, Uganda and Rwanda. The above article is not legal advice and does not automatically make our readers our clients unless they specifically instruct us to act or represent them in any way.
We assist local and foreign clients to process company registration and business licences in Nigeria, Ghana, Kenya, Uganda and Rwanda.
Please contact Koriat & Co. through admin@koriatlaw.com or 09067842241 if you require additional information about or assistance in processing company incorporation or application for a money lender’s licence.
