+234-704-009-2801, +234-704-009-2804
Mon - Fri 09:00-17:00
Contact Us Today

How to Start a Money Lending Business in Nigeria

*Reviewed 27th August 2021*

    The need for funds has always been sacrosanct. Unfortunately, most financial institutions that have the license to lend out money, do so in an institutionalized manner and are heavily regulated (e.g., commercial banks, microfinance institutions, etc). There are also nerve-racking CBN requirements to operate as a financial institution, especially the requirement of paid-up insurance deposits. This is where the money lending business has an edge; there is no need to seek CBN’s approval to register it and you do not need to make an insurance deposit as well. 

It is a similar situation for entrepreneurs that seek to operate digital lending platforms; many startups consider the moneylending route as a great option to start digital lending because it saves them the stress and cost of processing CBN approvals. This article is therefore necessary considering the high demand for funds and the rise in technology-enabled finance platforms. If you are planning to start your own money lending business, you will find this article very helpful. You will also find our article on REGULATORY FRAMEWORK FOR OPEN BANKING IN NIGERIA very insightful. if you intend to operate a money lending business, it is important that you obtain the license needed to operate one. This is because you cannot hold your company out as a moneylender except you have a money lending license and one of the consequences of having the license is that you are able to charge interest on borrowed sums and also enforce it.  Below are the steps to process your money lending license:

1.  Company registration: To operate a money lending entity, you would need to incorporate a company and not a business name. The Corporate Affairs Commission recently started a practice whereby it does not approve the registration of companies with financing as an object except the preliminary approval of the CBN is sought and obtained. An object to operate as a moneylender is however exempted from that rigour. More interesting is the fact that you can start a money lending business with a one million share capital company. However, while the Companies and Allied Matters Act allows for a “one director” company, you need at least two directors to process a money lending license. Those directors must also have tax clearance for three preceding years before registration. It is therefore important that this is sorted while screening for the position of a company director.


2.  In addition to registering your company, you also would need the following:

·         A cover letter of your company

·         Metallic seal to authentic correspondences 

·         Office address for money lending activity

·         Certified True Copy of company certificate and other incorporation papers.

·        Company’s tax clearance certificate. If it is a new company, you may apply to FIRS for TCC or otherwise show proof that the company is registered for tax purposes. The easy way to show proof is through tax identification number


·         Three-year tax clearance of at least two directors


3.  Once all requirements are sorted, you may wish to start the process by applying for police clearance. At this stage, the fingerprint of the directors will be scrutinised at the fingerprints department of the police for necessary security checks after which a clearance is issued where the directors have no criminal records.


4.    An application can also be made to the designated magistrate in charge of the territory within which the money lending business is to be commenced. The content of the application would largely depend on the Laws of the State within which the business is to be commenced. For instance, in Lagos, there are designated magistrates in charge of approving moneylending applications and the forms to be filled varies as well.


5.  Upon receiving police and magistrate clearances, an application may thereafter be made to the ministry/department in charge of approving money lending license which would conduct its due diligence before approving the license. Part of the due diligence may include visiting the applicant’s office address among other things after which the license would be issued where the application is successful and all fees have been paid. 


In Lagos State, the Ministry of Home Affairs and Tourism has the mandate of approving the license. 


A money lending license allows the license holder to operate physical offices within the State of registration. It however does not mean that the operator cannot service customers in other States of the Federation. This is where digital lending may have some advantage. You may therefore wish to do more than just lend out money by going a step further to set up digital platforms for you to be able to service a wider customer base. 

The content of this article is intended to provide a general guide and does not substitute for legal opinion, readers are therefore urged to seek proper legal advice. You can reach any of the lawyers to help you put together the clause.