Moneylenders regulated
by the Central Bank

Minimum capital set at $1.33 million

The Central Bank has imposed a range of new restrictions on moneylending businesses, placing them more closely under its scrutiny. It has also set their minimum capital at LL2 billion ($1.33 million). Moneylenders provide loans in small amounts to people who cannot borrow from banks, in exchange for a real guarantee.

BDL said in a new circular issued last week that moneylenders should obtain its prior approval before opening a new branch and should have available money worth LL2 billion for each new branch.

Georges Kazan, manager of Comptoir Libanais pour le Crédit et la Finance, said that the minimum capital required by BDL is too high for small money lending establishments.

BDL said in the circular that moneylenders are not allowed to grant loans worth less than 60 percent of the collateral provided by the customer. Credit facilities granted to one customer should not exceed five percent of the moneylender’s equity or LL150 million ($100,000), whichever is lowest.

The value of loans granted by moneylending joint-stock companies should not be more than four times the shareholders’ equity, while other legal forms of moneylending establishments are not allowed to grant loans worth more than double their equity. Moneylenders should declare any loan they provide to any client to the ‘Centrale des Risques’ (lending risks office) at the BDL.

Moneylenders are not allowed to borrow from banks and financial institutions whether directly or indirectly, according to the circular.

New moneylending establishments are not permitted to start operations before obtaining BDL’s approval and before its publication in the official gazette. Existing establishments have a year to comply by these new rules, including for the capital requirements.

The circular comprised additional restrictions that included the Central Bank’s right to object to the election of a chairman or the appointment of any manager of a moneylending company.

The Central Bank’s move came after some moneylending companies were suspected of committing wrongdoings and abusing their customers. Kazan said that the State should punish the wrongdoers instead of making sweeping restrictions that make their work much harder. This move is also part of ongoing measures to fight money laundering and financing terrorism.

BDL’s efforts to regulate this sector began in February 2015, when it required that moneylenders inform it of their contact details and the kinds of services they provided. BDL said it will withdraw the approval given to moneylenders who do not provide the required information and will prohibit them from engaging further in lending operations.