Money lending is a business that involves providing short-term loans to individuals and businesses. To engage in this business, a license is required in compliance with the law. The first license required for a digital money lending business is a money lending license before obtaining a digital lending license.
Typically, the money lending business can be carried out physically or digitally such as making use of apps. Where it is just a physical business, only the money lending license is required but where the service will be provided digitally, a digital license is required in addition to the money lending license from the state.
Over the years, there has been an increase in the number of online money lending businesses in Nigeria. This business is highly regulated due to its nature. The license for operation is governed by each state where it is to be operated while for digital operation the regulatory body is the Federal Competition and Consumer Protection Commission (FCCPC).
In 2022, the Federal Competition and Consumer Protection Commission (FCCPC) issued the Limited Interim Regulatory/Registration Framework and Guidelines for Digital Lending, 2022 (“the Guidelines”) mandating all digital money lenders to register with the FCCPC before the commencement of business operations. Digital lending companies incorporated before 2023 that are yet to register with the FCCPC are mandated to pay a penalty fee for failure to comply with registration as at 2022. Some of the top digital lending businesses in Nigeria include Fairmoney, Aella, Palmcredit, Paylater, Kiakia, Carbon and branch.
Requirements for Obtaining a Digital Money Lending License
- Fill and submit the digital money lender’s registration form
- Incorporation documents of the company
- The company’s terms of use and privacy policy
- The company’s code of conduct
- Money lending license
- Brief description of the business and details of its groups, subsidiaries and affiliates.
- Evidence of feedback and complaint resolution mechanism
- Evidence of payment of the registration fee
- Evidence of registration with the special control unit against money laundering
- Obtain and complete the requisite declaration form from FCCPC.
- Audit Trust Mark from the Nigerian Data Protection Commission (this can be applied for while processing the FCCPC registration)
- A compliance Audit Report and Privacy Impact Assessment Report from a duly registered Data Protection Compliance Organisation (DPCO).
Please note that applicants are allowed to register a maximum of 5 apps for digital money lending.
Digital Money Lending License application process
This is a step by step process on how to obtain the license which has been outlined below:
- Register the company with the corporate affairs commission (CAC)
- Obtain a license from the state of operation
- Fill and submit the digital money lender’s registration form with the required documents
- Obtain an audit Trust Mark from the Nigerian Data Protection Commission
- Obtain a compliance Audit Report and Privacy Impact Assessment Report from a duly
- registered Data Protection Compliance Organisation (DPCO).
- Pay the required fees and submit
- Upon review and it is confirmed that everything is fine, the registration will be approved
Cost of Registration
- Service fee is dependent on the professional assisting with registration
- Audit trust mark, report and privacy impact assessment report is dependent on the Data
- Protection Compliance Organisation
- Penalty fee is NGN500,000
- Registration fee per app- NGN500,000
Timeline for registration
It typically takes 2 to 3 weeks to process registration.
Validity of registration
There is currently no requirement for renewal of registration.
Post Registration Activity
After registration, digital money lending companies are expected to notify FCCPC of any changes in the details submitted for registration with 14 days of such change. Also, where the company wishes to register more apps, it must inform the commission.
Conclusion
Any company desirous of providing digital money lending services should comply with FCCPC registration to avoid sanction as failure to do so can lead to black listing of the business and removal of the digital apps from online platforms such as Google Play Store and Apple Store which will make the money lender unable to carry on business in Nigeria. It is also important to note that it is a criminal offence to engage in the business of money lending without a money lenders license.
