Question:
I would like to start a small loan business, where I offer people money and charge 15 percent interest on the repayments. What is the proper way to go about this? Are there any legal ramifications if I don’t follow the right procedure.

Answer:
Basically what you will be doing is operating as a micro lender and there are definitely legalities that will have to be adhered to.

Firstly, if you lend an amount exceeding R10 000 you will be breaking the law. Only registered banks are allowed to lend R10 000 and over. Your business will fall under the rules of the Micro Finance Regulatory council. To get a clear picture of what will be required of you can log onto their website: www.mfrc.co.za.

Lending money is a risky business, so be prepared to accept that some people do not pay their bills. The other critical factor to your success is excellent management systems and software to help you ensure that your calculations are correct.

There are harsh penalties for overcharging clients and the MFRC is very effective at bringing offenders to book. It would be wise to sit down with one of their officials and get the low down on what is expected of you.