THE pawnshop industry in the Philippines is expected to grow in the next few years, adapting to changes that the age of Internet and digital technology present.
According to a report by Luis Buenaventura of Quartz Media Llc., the Internet is revolutionizing the pawnshop industry, specifically in the Southeast Asian region.
“The Internet is beginning to revolutionize the sector in Southeast Asia, five years after Colorado-based PawnGo helped pioneer online pawnbroking elsewhere,” said the report, titled “Pawnbroking is huge in the Philippines—and it’s going online”.
This began in the Philippines with the entry of PawnHero Pawnshop Philippines Inc. (PawnHero) in February 2015. PawnHero said it enables customers to upload photos of the things they want to pawn online. After answering a few questions, the customer will receive price quotes for their items directly from PawnHero.
“If the user accepts the quote offered, their item is retrieved by a courier, who gives them an empty debit card,” said the Quartz Media Llc. report published in November last year. “Once PawnHero has appraised the item in person, the debit card is topped up.”
According to Buenaventura, the format that PawnHero provides customers in terms of pawning is a safer option in the Philippines, since the majority of where Filipinos can borrow money end up being through loan sharks.
ON its web site, PawnHero not only allows jewelry to be pawned but secondhand items, as well. The centralized appraisal center of the company was noted to use modern technology, enabling for a fair and accurate appraisal of the items uploaded.
“PawnHero charges interest dependent on the item you are pawning and the loan duration you choose,” according to the PawnHero Philippines web site. “In short, with interest rates as low as 2.99 percent, PawnHero charges one of the lowest interest rates in the Philippines.”
Under the platform or system of pawnbroking, cash offers tend to be less than 50 percent of the collateral’s actual cost, and a monthly interest rate of 3 percent or higher is added to the outstanding balance. Pawnshops also place a service charge of up to 2 percent.
The report further added that in the country, pawnshops are as common as automated teller machines (ATMs), since the absence of traditional credit or banking options increases the citizens need for a platform that will generate funds quickly or emergency loans.
Around 90 percent of Philippine households was explained to be working with an estimated $10 or less budget a day, which makes for the Philippines to house around 18,500 pawnshops.
“Over the centuries, the pawnshop business model hasn’t changed,” the Quartz Media report said. “But in the developing world, the industry has grown enormously.” According to the Quartz Media report, the Philippines now has one pawnshop for every 3,200 adults. “For the same slice of the popu-lation, there are only about two registered physicians.”
PawnHero is duly incor-porated in the Philippines and licensed by the Bangko Sentral ng Pilipinas (BSP). Its operations in
the country is headed by its president, Nico Jose S. Nolledo.
Markets and trends
A report, titled “Philippines Pawnshop Market Outlook to 2020 —Convenience with Pawning and Remittance Services to Stimulate Growth,” the poor functioning of the banks in the Philippines have provided a higher popularity to other informal sources of credit, such as pawnshops.
“Pawnshops these days have been growing at a remarkable pace in terms of their reach and the credit provided to the people,” said the report by Ken Research Private Ltd and published in April last year.
According to BSP data, under the consolidated statement of condition for 2014, total assets recorded for the pawnshop industry reached P40.837 billion, which was up by 19.1 percent, from the P34.266 billion in 2013.
Broken down, cash on hand accounted for P5.087 billion for 2014, checks and other cash items accounted for P76 million, deposits made in banks reached P1.447 billion, loans and advances took P25.727 billion of the pie, investments in bonds and other government securities saw P12 million, and equity investments were at P17 million, among others.
The gross assets related to corollary business was at P3.706 billion for the year, up by 96.5 percent compared to the P1.886 billion in 2013. “Lack of credit facilities, lower credit-card penetration and incomplete credit histories has prompted the borrowers to resort to the pawnshops since they require just a valid identity proof and collateral to provide the credit,” the report said.
While liabilities for the industry in 2014 totaled P20.088 billion, up by 36.5 percent, from the P14.708 billion in 2013.
Of the total, P11.975 billion was for loans and notes payables, acrrued taxes and other expenses was provided P1.063 billion, unearned income and other deferred credit had P130 million, liabilities related to corollary business were given P1.244 billion, and other liabilities accounted for P5.676 billion. To be continued
Image credits: Nonoy Lacza