Money lending is an all-important consumer credit strategy in Nigeria. Money being an indispensable material to meeting needs and demands, it is therefore required to get an option for those who don’t have it but seek it judiciously. Thus, the art of lending started with financial institutions, that is banks, who grant credit facilities on a large scale mainly for investment.
However, those who could not meet the requirement these loans called for which is in form of a collateral were not covered. Hence, the rich people started giving out money to the low-income earners without collateral. This act became known as Money Lending and the givers were known as Money Lenders.
A money lender has been defined in Section 4 of the Money Lenders Law Chapter 7 Laws of Lagos State to mean a person who lends money at interest or who lends a sum of money in consideration of a bigger sum being repaid shall be presumed to be a money lender until contrary is proven. In the same vein, it is only companies and organizations that have been given the necessary consent by the government that can legally announce and advertise itself carrying on a money lending business.
Regulation of the Money Lending Business in Nigeria
An application shall be made to the magistrate court for the application of a Money Lending License in Lagos which will include the following documents:
1. An Application letter
2. Certified True Copy of the CAC Incorporation Documents- CAC Form 1.1
3. Memorandum and Article of Association of the Company.
4. Certificate of Incorporation of the Company.
5. Tax Clearance for the individual applicant or Corporate Body, if it is a company newly incorporated, then provide evidence that the company is a registered taxpayer.
6. Three-year tax clearance for at least 2 directors of the company where the applicant is a company.
7. Police Clearance of the applying individual/ Corporate body [in Lagos, it is obtained from Commissioner of Police, Lagos State Command, Ikeja] [Note that this is different from the Police clearance to be taken to the Ministry vis-vis.
8. Reference Letter from the directors’ bank.
At the approval of the application by the Chief Magistrate, a Money Lenders Certificate (Form B) would be issued along with a letter addressed to the Ministry of Home Affairs known as Form C. Then an application with the necessary documents will be made to the ministry of Internal Affairs by the applicant. It is however mandated that the applicant will make payment for the purchase of the application form required for the regularization of Money Lenders Certificate which is the sum of #25,000 with a receipt for proof of payment.
Also, an invoice with the sum of #200,000 will be received by the applicant for the payment of Money Lenders fee, which will be paid to the Government Account. Below are the documents to be submitted together with the Application for Regularization form ;
1. A Covering Letter- (i.e. Application letter)
2. Money Lender Ordinance [Form B] 1938 – from Magistrate Court
3. Duly completed Form C- from Magistrate Court.
4. Police Report from Commissioner of Police showing- fingerprints of Directors/ Proprietors/ Trustees/ Applicants.
5. 3-year Income Tax Clearance Certificate, [including current year] / Development Levy for each individual applicant/ Director/ Proprietor/Trustee.
6. Pay as You Earn [PAYE] Certificate, Tax Clearance of at least two  of its directors, and evidence of payment of company taxes.
7. Certificate of Incorporation of Company from Corporate Affairs Commission.
8. Evidence of payment of Application fees to the Lagos State Account.
9. Evidence of maintenance of a bank account with a reputable bank in Nigeria.
Inspection and visitation is the final of the processes involved to getting a money lending license. This stage will be done by the officials of the Ministry of Home Affairs and Tourism, to investigate the company in question. At the satisfaction of the whole company’s money lending activities and compliance with necessary statutory requirements, the applicant will be issued a Money Lending License Certificate.
However, an annual renewal of the Money Lending License is expected because the license expires December of every year. Below are the requirements for the renewal of money lenders license:
1. Application for renewal
2. Moneylenders ordinance (form B) from Magistrate Court
3. Duly completed and endorse (form C) from Chief Magistrate court
4. The previous license issued
5. The year’s Directors tax clearance
6. Evidence of payment of renewal fee.
7. Re-visitation and inspection.
It is suffice to say that a money lending institution can only successfully bring an action in court for a default of payment by the borrower upon the basis of the license that has been given by the government. An unlicensed and unregistered money lender cannot bring an action for a default in court.