Cooperative License Vs Moneylender's License in Nigeria

Cooperative License Vs Moneylender's License in Nigeria

You've heard about cooperatives and moneylenders but never fully understood the difference between their licenses in Nigeria. Both provide financial services to members and customers, yet operate under distinct regulations. This article will demystify those distinctions, helping you gain clarity on which license is right for your needs. We'll examine the key features, requirements, and benefits of each, including maximum lending rates, geographic restrictions, and membership eligibility.

You'll leave informed on how to choose between a cooperative or moneylender license for your financial business in Nigeria. The information provided will empower you to make the best decision given your goals and target market. Continue reading for an in-depth look at these distinct licenses.

Understanding Finance Licenses in Nigeria

Cooperative Society License

A cooperative society license in Nigeria allows a group of individuals with a common economic, social or cultural interest to come together to form a business entity. To obtain a cooperative license, at least 10 individuals must register with the Cooperate Affairs Commission. Once approved, the cooperative can provide financial services such as savings and loans to its members. Cooperatives are very popular in Nigeria, especially in the agricultural sector and business sector.

Moneylender's License

A moneylender's license allows an individual or entity to lend money to people and businesses at an interest. To qualify for a moneylender's license in Nigeria, you must be a registered company. The application process includes conducting a company name search, preparing documents like a business plan and bank statements, and paying the required licensing fees.

Moneylenders typically charge higher interest rates than banks, so they are often a last resort for individuals and small businesses unable to obtain financing from traditional lenders. However, moneylenders play an important role in providing access to capital for those who may not otherwise have access to funds, Both cooperative societies and moneylenders provide much needed financial services in Nigeria, despite facing significant challenges like non-repayment of loans, high operating costs, and lack of public trust.

In summary, while the licenses differ in scope and eligibility criteria, they both facilitate the flow of money through Nigeria's economy. Prospective licensees should evaluate which option best suits their financial and operational capabilities. With proper due diligence, either license presents viable business opportunities.

Key Differences Between a Cooperative License and Moneylender License

Regulatory Authority

A cooperative society is regulated by the CAC (Corporate Affairs Commission), while a moneylender is regulated by the Central Bank of Nigeria under the Money Lenders Act. The CAC ensures compliance with the Cooperative Societies Act, while the Central Bank oversees moneylending activities.

Interest Rates

Cooperatives typically charge lower interest rates since they are not-for-profit organizations. Moneylenders are for-profit businesses, so they charge higher interest rates to generate returns for shareholders. Moneylenders have more flexibility in determining interest rates, whereas cooperatives have restrictions on the maximum interest rates they can charge. Purpose Cooperatives aim to provide affordable financial services to members, while moneylenders seek to generate profits. Cooperatives distribute surpluses back to members, whereas moneylenders distribute profits to shareholders. Members of a cooperative also have voting rights and can run for leadership positions. Moneylenders are owned by shareholders who do not necessarily use their services.


Cooperatives face more restrictions, like limits on the investments they can make and the interest rates they can charge. They can only provide services to members. Moneylenders have more flexibility and can provide services to anyone. However, they face minimum capital requirements and must disclose key terms to borrowers like interest rates, fees, and penalties. In summary, while cooperatives and moneylenders both provide lending and savings services, there are significant differences in their regulation, purpose, and operations. Determining which license is right for your organization depends on whether you aim to generate profits or serve members at affordable rates.

Frequently Asked Questions About Finance Licenses in Nigeria

What is a Cooperative Society License?

A Cooperative Society License authorizes the holder to operate as a cooperative financial institution in Nigeria. Cooperatives provide accessible financial services to members for social and economic development. The Central Bank of Nigeria regulates cooperatives to promote monetary stability and a sound financial system. Cooperatives require a minimum of 5 members to register and are owned and operated by members on a not-for-profit basis.

What is a Moneylender's License?

A Moneylender's License permits the holder to engage in money lending activities, including granting secured and unsecured loans to individuals and businesses at approved interest rates. Moneylenders aim to generate profit from interest charged on loans. They are regulated by the Central Bank of Nigeria to prevent unethical practices. Moneylenders have more flexibility in determining loan terms but also face more risk if loans default. They require higher capital to operate compared to cooperatives.

What are the requirements to obtain the licenses?

To obtain either license, applicants must meet requirements like a minimum paid-up capital, having qualified directors, submitting audited accounts, business plans, and bank references. The specific requirements and application process differ for each license. Cooperatives have lower paid-up capital and less stringent requirements given their not-for-profit nature. Moneylenders have higher requirements due to the risks and responsibility involved.

Which license is right for my business?

The appropriate license depends on your business model and objectives. If focusing on community development, a Cooperative Society License may suit you. If aiming to generate profit from lending activities, consider a Moneylender's License. Analyze the requirements and responsibilities of each to determine what aligns with your vision. You may need to adjust your business plan to meet regulatory requirements. Consulting with legal and finance professionals can help in making an informed choice.


The choice between obtaining a cooperative or moneylender license in Nigeria requires careful consideration of your business model and target market. While the cooperative license enables lending and savings mobilization for members, the moneylender license provides more flexibility. Conduct in-depth research, analyze the regulatory requirements, and consult with professionals to determine the best fit.

With the right preparation and strategic planning, your lending business can thrive with the appropriate formal authorization. Approach the licensing process as an opportunity to build a firm foundation for your enterprise. Stay adaptable as market conditions elve. Ultimately, your license type matters less than your ability to meet customers' needs responsibly and sustainably