Digital loan business in Nigeria engaged in cash loans in exchange for a bigger repayment sum consisting of the principal loan sum and accrued interest.
There are several money lending platform operating urgent loan in Nigeria. With the increasing number of digital service financial platforms, these loan firm provide quick loans to prospective customers, through them you can now get an instant online loan within 24hrs or sometimes in less than five minutes on different loan apps.
Digital loan business in Nigeria is regulated by the Money Lending Law of the various states. According to section 4 of the Money Lenders’ Law of Lagos State, a person who lends money at interest or who lends a sum of money in consideration of a larger sum of money being repaid is a money lender.
If the Law guiding the operation of this industry, the might barred any financial technology companies from providing payment or transaction services to online money lenders known as ‘digital loan’.
The Nigerian Government in a raid by its joint committee often time investigate rights violations and unfair practices. The government conduct investigation regularly to disclosed any online money lenders that did not register their platform with the Corporate Affairs Commission (CAC) and also engaged in activities that were against the rights of Nigerian consumers.
However, If you’re thinking to to start digital loan business in Nigeria, there are a few factors that have to be taken into consideration. And some of the factors are what we have discussed above. But we believe it is not sufficient to get you started.
Lets start our discussion with a question; What digital loan business?
Digital loan business is a money lending business with the responsibility to lends small amounts of money at a higher or minimal rate of interest. The reason for charging higher rates of interest is that the money lender faces a higher risk of default than normal banks due to various reasons. Some example of digital loan business in Nigeria include: Specta, Rapid Cash, C24, Lidya, Carbon, KiaKia, QuickCheck, Aella Credit, Fint, Zedvance, kwikmoney, formerly kwikcash, FairMoney, LendMe, Palmcredit, PennyLender, LMoney, BeeLend, PayConnect, Branch and money more.
How to Start Digital Loan Business in Nigeria
To start a digital loan business in Nigeria you will need a capital. This capital will be used to get your money lending license and other registration needed to run an individual money lending business or a private money lending company. The following factors are also necessary:
Register Your Business Money Lending Business
The first step to start digital loan business in Nigeria is to register your money lending business name with CAC. The Corporate Affairs Commission (CAC) is the approved body for registering businesses in Nigeria. With a registered business, you can open a corporate account with any bank of your choice.
A registered business is trusted by clients and will help you build credibility. Also, you have access to the different financial support available to entrepreneurs with your registered business. A money lending business is registered as a limited liability company with 20 Million share capital.
To register your private business is very easy. The first step is to check the CAC portal and run a search on your preferred business name on CAC’s portal. If the name is available, the name will be approved and you can then reserve the name. But, if it already exists, it will be disapproved and you will have to conduct another search for another name.
Obtain Money Lenders License
Money lenders license is a legal authorization to operate in the financial industry in Nigeria. To legally start digital loan business in Nigeria, an individual or company must first obtain a Money lenders license. A license for the business of money lending is issued by the state in Nigeria. The Federal Capital territory (Abuja) in Nigeria also has the authority to issue a Money lender’s license. How to obtain license or register to become a money lender in Nigeria? In Nigeria, you cannot engage in a digital loan business or money lending without the required license. And if you engaged without license is a punishable offense. This why we have provided the requirements needed to process your money lending license and start digital loan business in Nigeria financial industry. The requirement to obtain a money lenders license to start digital loan business in Nigeria include:
- Application letter using the letter headed paper of the company addressed to the Chief Magistrate on a Letterhead paper with the company seal affix to the letter);
- Certified True Copy of CAC Form 2;
- Certified True Copy of CAC Form 7;
- Memorandum and Articles of Association of the company;
- Certificate of Incorporation;
- Means of identification of the directors (photocopies);
- Tax Clearance of the Individual or Corporate Body obtained from Federal Inland Revenue Service (FIRS) and if it’s a new company – provide proof of tax registration;
- Police Clearance of the applying individual/ Corporate body showing the thumb printing of one of the company director.
- Evidence of Maintenance of current account under a licensed Bank/ Reference letter from the company’s bank;
- Form B and Form C ( This is usually prepared by the Court after you submit the application).
After the above documents have been submitted, the applicant will be issued a Money Lenders License which shall be valid for one (1) year and subject to annual renewal and we have provided the requirements for the renewal of money lenders license below:
- Application for renewal
- Moneylenders ordinance (form B) from Magistrate Court
- Duly completed as well as endorse (form C) from Chief Magistrate court
- The previous license issued
- Updated tax clearance
- Evidence of payment of renewal fee.
- Inspection and Re-visitation.
Note that money lending license is granted by a state government agency authorized to do so within the state where the money lending company seeks to establish. In Lagos state for example, the certificate is granted by the Magistrate Court while the license is granted by the Lagos State Ministry of Home Affairs. However, in Abuja, the Magistrate Court grants both the certificate and the license.
