HOW TO SET UP MONEY LENDING COMPANIES IN GHANA

IS THERE A SPECIAL LICENCE FOR A MONEY LENDER COMPANY IN GHANA?

Yes. No person shall carry on the business of micro lending or finance business in anywhere within Ghana unless the Bank of Ghana licenses it to do so. Ghana is becoming a destination for foreign direct investment and many Fintech payment and digital lending businesses are thriving in the country as well as Nigeria, Kenya and Rwanda.

You can also read about how to set up a money lender company in Nigeria HERE.

WHAT IS THE SHARE CAPITAL REQUIREMENT FOR A MONEY LENDER COMPANY IN GHANA?

The minimum required share capital for a money lender company in Ghana is GH¢ 2,000,000 (Two Million Ghana Cedis only). This regardless of whether the said company is wholly owned by Ghanaians.

In 2015, the Bank of Ghana directed Money Lending companies to increase their share capital from One Million Ghana Cedis to Two Million Ghana Cedis in order to strengthen the insolvency and liquidity options of the money lending companies. For this reason, some money lending companies have begun to merge with others in order to strengthen their liquidity.

To show its seriousness with the above-mentioned directive on recapitalization, the Bank of Ghana has carried out a cleanup exercise and the result of this is that the licences of some companies were revoked. Based on the above, the Bank of Ghana since the commencement of the recapitalization drive in this sector of the economy has put a halt to the issuance of licence to applicants to encourage mergers and acquisition for the reason stated above. What this means is that new players in this sector of the Ghana market will have to scout for already licenced money lending companies who are open to a merger or an outright acquisition of their company.

WHEN WILL THE BANK OF GHANA RESUME THE ISSUANCE OF LICNECE?

There is no end in sight at the moment as this drive commenced since 2015. At the very least, until the Bank of Ghana is satisfied that the insolvency and liquidity options of most companies in this sector have attained a reasonable amount of strength.

ARE THERE COMPANIES THAT ARE WILLING TO OUTRIGHTLY SELL THEIR LICENCES TO NEW INVESTORS?

Yes, most companies are interested in a merger with investors and not an outright sale.

WHAT IS THE PROCEDURE FOR MONEY LENDER LICENCE IN GHANA?

Application for a licence to operate the business of money lending shall be in writing and addressed to the Head, Other Financial Institutions Supervision Department, Bank of Ghana, Cedi House, Accra. The application should indicate in clear terms the licence  being applied for as there are other micro finance licences issued by the Bank of Ghana.

The application shall be accompanied by the following:

1. A certified true copy of the Certificate of Incorporation and company’s Regulations or other Instrument relating to the proposed business, or by or under which any person proposing to carry on such business was established. The registered name of the company should include Money Lending.

• Full particulars of and detailed and clear definition of activities it proposes to carry out.

1. Details of registered place of business, principal place of business accessible to the public and suitable for the services contemplated and a description of other places where it proposes to do business and the areas it proposes to serve.

1. Names, addresses, occupations and corporate affiliations of persons who hold or would hold significant shareholdings directly or indirectly in the proposed venture and the respective values of such holdings or proposed holdings.

1. Duly completed Personality Note Form (“PNF”) by at least five [5] directors (two (2) of whom should be independent directors), shareholders and key management staff of the said business. Please note the majority shareholder should not be the board chairman or the Chief Executive Officer of the company.

1. Tax Clearance Certificate of Directors, Shareholders and key management personnel.

1. Curriculum Vitae of Directors, Shareholders and Key Management Personnel.

1. Financial data including financial statement and feasibility reports which should contain among others:

• business plan and financial projections (income statement, balance sheet and cashflow) for the first five (5) years of operations.
• Details of assumptions upon which the financial projection has been made.

1. Objectives and aims of the proposed Money Lending Institution.

• Justification for the establishment of the Money Lending Institution.

• Organisational structure of the company setting out in detail the functions and responsibilities of the top management team.

• Any other information that relates to the viability of the business.

• Information on capital and documentary evidence of sources of funds.

• Police clearance for shareholders, directors and key management staff.

• Information on other matters that applicant considers relevant for the determination of the application.

• Evidence of payment of a non-refundable processing fee of GH¢500.00 or as determined by the Bank of Ghana.

• Where the application has been submitted and the Bank of Ghana requires additional information or documents for the determination of the application, same will be provided by the Applicant.  

WHAT IS THE MINIMUM NUMBER OF DIRECTORS REQUIRED FOR A MONEY LENDING COMPANY IN GHANA?

While the general requirement with regards to number of directors for registering a company in Ghana is two, there are some industry specifics. The money lending industry is one of such. In this case, a minimum number of five (5) directors is required for incorporating a money lending company in Ghana.

ARE THERE ANY SPECIAL REQUIREMENTS WITH REGARDS TO SHAREHOLDING IN A MONEY LENDING COMPANY IN GHANA?

Shareholders in a non-deposit taking microfinance institutions such as money lenders  may be exclusively owned by Ghanaians, exclusively owned by foreigners or jointly owned by Ghanaian(s) and foreigner(s). However, foreign capital imported into Ghana must be registered at the Ghana Investment Promotion Commission.

You can also read about how to set up a money lender company in Nigeria HERE.

IS THERE ANY INTERVIEW OR INSPECTION REQUIREMENT FOR THE BANK OF GHANA’S LICENCE?

Yes. As part of the requirements for obtaining the money lending licence, an interview will be conducted by the Bank of Ghana for the principal officers of the company.

However, the interview may be conducted via zoom. This can only be possible by way of a special request by the company.

WHAT ARE THE LICENSING STAGES FOR MONEY LENDER APPLICATION PROCEDURE?

(i) Approval In Principle (“AIP”) Stage

The Bank of Ghana may issue an “Approval-In-Principle” for a period of six (6) months to the applicant on such terms and conditions as it may consider necessary and appropriate, if it is satisfied that:

[a] the applicant would carry on the business with integrity, prudence and the required professional competence; and

[b] the applicant has the capacity to raise the initial paid-up capital required to hold a licence through verifiable means.

NOTE: An AIP DOES NOT CONSTITUTE a final licence, as such applicants are required to meet all the conditions stated on the AIP in order to obtain the final licence.

(ii) Final Licence Stage

The Bank of Ghana may issue the final approval and licence to the applicant after satisfying itself that the following pre-licensing conditions have been met:

1. The company has raised the minimum paid up capital.

• The company has provided evidence of title deeds/lease agreements.

• The company has approvals by relevant authorities such as the Ghana Revenue Authority, The Ghana Police etc.

• The company has adequate and comfortable business premises with the following duly put into consideration when setting up the office; staff operating area, ventilation, lighting, etc.

• Display of name of company as contained in the certificate of incorporation and logo where appropriate.

• Possesses Operational plans and policies approved by the Board.

• Has accounting and operating manuals, appropriate management information systems, (computers, appropriate software), internal controls and training manual.

• Has in place adequately trained and sufficiently experienced staff as well as competent key personnel;

1. Has submitted its first year pre – operating financial statement of affairs and budget.

• The minimum paid up capital/shareholders is acceptable and the source is verifiable and found to be satisfactory to the Bank of Ghana; and

• The applicant has met any other conditions imposed by the Bank of Ghana.

WHAT ARE THE ESTIMATED COSTS FOR SETTING UP A MONEY LENDER COMPANY IN GHANA?

The applicable fees to obtain money lending licence for a company.

1. Non-Refundable Processing fee: GH¢500.00
2. Non-Refundable Licensing fee: GH¢1,000.00
3. Registration with the Micro Credit Association of Ghana:

(iii) Annual licence renewal fee: GH¢500.00 which should be paid by January 31 of each year.

Please note that the above costs relate to licensing a money lender company only. There may be other costs relating to incorporation, tax registration, bank account opening and other out-of-pocket expenses regarding new companies.

IS THERE A SPECIAL LICENCE FOR ENTERPRISE MONEY LENDER?

Yes. Apart from the licence granted to money lender companies, business ventures have a special lending licence with its own licensing requirements.

WHAT ARE THE REQUIREMENTS & PROCEDURE FOR OBTAINING LENDING LICENCE BY APPLICANTS WHO ARE ENTERPRISES?

For an Applicant who is an enterprise, application commences from the Micro Credit Association of Ghana (“the Association”). The process is as follows;

1. Registration with the Micro Credit Association of Ghana.
2. Applicants must equally obtain and complete a preliminary registration form from the Bank of Ghana for licensing as an enterprise.
3. Obtain a Police clearance report on the proprietor (this requirement is specifically for first time applicants).
4. The Association by way of a recommendation, submits the application to the Other Financial institutions Supervision Department of (“OSFID”) Bank of Ghana attaching the following documents:
5. Personality Note Form (already completed by the applicant)
6. Bank statement of the Applicant to show that the Applicant has a minimum balance of GH¢50,000 in their bank account.
7. Educational certificate of the Applicant
8. Police Clearance report in favor of the Applicant.
9. Further background checks will be carried out by the OSFID on the applicant.
10. Upon obtaining satisfactory reports on background checks undertaken, a licence will be issued.

NOTE: Applicants who are applying as an Enterprise, do not require an Approval in Principle before issuance of final licence. AIP is only issued to Applicants who apply as entities. Further note that Applicants who are working in any financial institution in Ghana cannot apply for the money lender licence. Where an Applicant has previously held a position in a financial institution, he must have resigned his position before applying for the licence. This is done to prevent a conflict of interest.

CAN FOREIGNERS OBTAIN THE MONEY LENDERS LICENCE AS AN ENTREPRISE?

No. The Money lenders licence for sole proprietors/enterprise is strictly for Ghanaians. Foreigners who intend to obtain the licence must first register a company in Ghana and apply through the company.

WHAT ARE THE APPLICABLE FEES FOR LICENSING ENTERPRISE LENDERS?

1. Registration with the Micro Credit Association of Ghana- GH¢2,650
2. Application processing fee: GH¢100.00
3. Licensing fee: GH¢500.00

WHAT IS THE ESTIMATED TIMELINE FOR LICENSING A MONEY LENDER?

The licence can be obtained within a period of 7-8 months.

DOES THE MONEY LENDER LICENCE ALLOW THE LICENCEE TO DO BUSINESS IN ALL PARTS OF GHANA?

Until recently, a money lending licence in Ghana applied to all regions. However, the Bank of Ghana now require that a licence only covers the region within which the registered office of a company is situated.

However, where one intends to operate using the same licence in another region of Ghana under the same company, an application for approval to do business in the new region will be made to the Bank of Ghana to that effect.

Operations in the new branch can commence upon approval of the application.

WHAT ARE THE LIKELY DELAYS TOWARDS OBTAINING THE LICENCE?

• The Bank of Ghana relies on other agencies both local and external in the processing of applications, and this could cause delays in the processing of applications.
• All information and documents submitted by the applicant must first be independently verified by the Bank of Ghana, which could further delay the process.
• Where the conditions for obtaining the licence change during the period of application, this could affect and prolong an application process.

You can also read about how to set up a money lender company in Nigeria HERE.

About KORIAT & CO.

We are a growing commercial law firm in Lagos and Abuja with network of lawyers and consultants across Africa. 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.

Please contact Koriat & Co. through admin@koriatlaw.com or 09067842241 if you require additional information about or assistance in making the application for a money lender’s licence.