Often times we hear people all over South Africa discussing how they make money by lending at higher interest rates. Basically what that means is that you lend friends, colleagues and people close to you. It’s about time you have a look at making that opportunity a legit business that comply with the South African regulations and law.
Please don’t get this wrong, the regulations and law still allow you to charge higher interest rates that are within affordable figures.
To start a legit micro finance business, you need to first understand that all financial institutions including big banks in the country are being regulated by the National Credit Regulator (NCR). The NCR was established as the regulator under the National Credit Act No. 34 of 2005 and is responsible for the regulation of the South African credit industry. It is tasked with carrying out education, research, policy development, registration of industry participants, investigation of complaints, and ensuring the enforcement of the Act.
How do small loan or micro businesses work?
To understand this better, think of your business as a bank. The very same way banks offer personal or short loans to people around the world, it’s exactly the same way you’re going to operate. The only difference between your business and the banks is that banks have to charge a fixed or specific interest rates per each of their loan products. Where as with small loans business, you can charge any interest rate you want based on an exemption in the Act.
Micro lenders and small loan business are mainly designed for people not looking to get into a long term loan agreement. These people do not need to produce any kind of collateral in order to qualify for the loan or in the case of failure to pay out the loan. Collateral may include factors such as credit history, or property or assets to use against the loan application.
How to register a loan business
To register a credit or small loan provider business in South Africa, you simply just must download application forms from the NCR website. You need to accompany your application with a non-refundable application fee of R500 and R250 branch fee per location.
Please follow this process in order to ensure your application is processed.
- Completed and signed application form (form 2)
- Companies and Intellectual Property Commission ( CIPC ) registration document or other official legal registration document
- Copy of the share certificate/s if applicant is company
- Certified copies of ID/Passports of all members/directors/trustees/partners/sole proprietors
- Resolution if applicant is a juristic person (see attached specimen)
- A Criminal Name Clearance Certificate for all the members/directors/trustees/partners or sole proprietors issued by the South African Police Services (SAPS) or other service providers listed in annexure A.
- Proof of payment of the registration fees:
- Non-refundable application fee of R500
- Branch fee of R250 per location or premises at or from which the applicant conducts registered activities
- Initial registration fee as indicated in the table below for each sub-category of registrant.
- A letter from the bank confirming the applicant’s banking details or a copy of a cancelled blank cheque.
- Proof of registration with the South African Receiver of Revenue Services (SARS).
Registering your business may be the best decision you have ever made in life. Loans have ensured sustainability to many financial institutions nation wide. This may be the best way to improving your lifestyle, just make sure you comply with the regulations, you do your taxes right to avoid penalties.