Legal

Last updated: January 6, 2025

You may need a license to lend in your country

Lending money informally, whether to family, friends, or close acquaintances—has been a universal practice for centuries. For this kind of informal lending, no license is typically required.

However, when it comes to running a formal lending business, the story changes. Lending is a regulated activity in most countries, and acquiring the appropriate license is often mandatory. The exact requirements depend on the legal framework in your country, but here are some general licensing paths to consider:

1. Local or regional money lending licenses

In many jurisdictions, lending is governed by local or regional laws. These regulations often specify: #1 Who qualifies as a moneylender: Some countries exclude individuals lending as a side activity from formal licensing requirements. #2 License application criteria: This may include proof of business registration, character references, and a review of your lending terms. Always consult the local regulatory authority for clear guidelines on obtaining and maintaining compliance with a money lending license in your area.

2. National licenses from central authorities

For businesses aiming to offer broader financial services, central regulatory bodies often oversee licensing. The requirements for these licenses can include capital thresholds, operational standards, and adherence to anti-money laundering (AML) and know-your-customer (KYC) regulations. These licenses are essential for:

Microfinance Institutions (MFIs): Enabling businesses to provide loans and savings accounts tailored to underserved or economically active individuals and small enterprises.
Finance companies: Authorizing credit services for personal and business needs, including installment loans, trade credit, or vehicle financing.
Commercial banks: Allowing businesses to accept deposits, offer loans, and deliver full-scale retail banking services.

Next steps

Navigating lending regulations can be complex, but it’s important to get it right to avoid legal pitfalls. The licensing process, documentation, and fees vary widely depending on your country and the type of financial services you want to offer.

Ready to find out how to get started in your country? Check out our comprehensive guide for lending licenses around the world.

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