Shane’s – The Pawn Shop, Inc

Pawnshops hit as SE Asians sweat before pay day


Faced with rising living costs and unable to wait until pay day, growing numbers of Southeast Asians are putting their gold jewellery and designer watches in hock, creating a boom in pawnshops across Singapore, Malaysia, Thailand and Vietnam.In a sign of the times, the cast of US reality TV show “Pawn Stars” paid a visit last month, promoting their show in a region where the industry is on the ascent.Pawnshop businesses are also in flavour with investors. The share price for Singapore’s MoneyMax Financial Services Ltd stands around 30 per cent higher than its initial public offering last month.These companies are trying to shake off their image as lenders of last resort to the desperate. But their newfound success may signal trouble for Southeast Asian economies, as pawnshops and other similar businesses typically outperform when household budgets are strained.

Inside an outlet of Cash Converters on the east side of Singapore, a golden statue of the Laughing Buddha sat alongside branded handbags, an old violin, electronic goods and cases full of diamond rings. Young and old customers were having items valued at the counter, while buyers hunted for a bargain.

“As the economy gets a bit tighter, we are definitely getting more customers coming in,” said Jeremy Taylor, Southeast Asia managing director for the company.

“Southeast Asia was quite protected from what was going on in Europe, but now when we see China slowing down a little bit, then things start to get a bit more tense.”

Cash Converters is a franchised network offering pawnbroking loans in certain markets like Australia, but in Singapore and Malaysia it specialises in buying and reselling second-hand goods.

Taylor reckoned the firm had seen 5-10 per cent more customers walking through the doors of its 15 outlets in Singapore and Malaysia during the past three months.

With Thailand in a technical recession and economic growth wobbling in Indonesia and Malaysia, pawnshops are in a sweet spot.

Malaysia, Singapore and Thailand occupy three of the top four positions for household debt levels in Asia, according to a Credit Suisse report in late July, and people who don’t qualify for bank loans are turning more and more to these alternative sources of finance.

Many pawnshops in Southeast Asia have swapped the traditional grilled store fronts, which may be intimidating to customers, for a more modern, less forbidding look. Customers also cite the convenience and flexibility to redeem their items when their cash flow improves.

Cash Converters plans to open more stores by the first half of next year, and is expanding its services to house calls and online commerce targeting the younger generation.

Thailand’s largest private pawnshop operator, Easy Money, has seen a 15-20 per cent rise in the number of customers in recent months, especially in areas near Bangkok, said managing director Sittiwit Tangthanakiat.

The company has posted an annual average growth rate of 50-60 per cent in the value of pawned assets since it opened in 2005. It has also more than doubled its outlets to 27 nation-wide from 12 last year, and plans to open two more next year.

“If household debts continue to rise, we think there will be more customers going to pawnshops,” Tangthanakiat said, estimating that Thailand’s pawnshop industry is worth up to 170 billion baht (NZ$6.8b).

Pawnshops and the kind of items that people pledge can be a window to the economy, said Rick and Corey Harrison, the father and son duo of “Pawn Stars” on their first trip to Asia.

“When the housing market fell in Las Vegas, we got so many Rolex and Tag Heuer watches it was ridiculous,” Corey said in an interview.

“There were all these mortgage brokers that made a lot of money while they were getting loans to anybody to buy a house. And when times got bad, they all went broke real quick and the first things to go were the high-end watches and stuff like that.”

Rick said there is huge potential for the pawnshop industry in Asia as it has become a “more mainstream” way of getting a quick buck and many pawnshops in the region are not allowed to charge high interest rates.


A supervisor at a property company in Singapore said he was put off by the lengthy process and all the documentation needed to get a personal loan from a bank. Trying to cope with soaring living costs, Ryan, who declined to give his full name, has turned to pawnshops instead.

He pawns his gold chain and ring several times a year for S$300-400 (NZ$295-393) each time in order to pay off utility and phone bills. Once he gets his salary, he redeems his belongings.

“Sometimes you need cash immediately. It’s something to resolve at that moment and you can’t be waiting for the bank to call you,” he said.

There are around 200 pawnshops in Singapore now, up from 114 in 2008. The amount of pawnshop loans given out hit S$7.1b last year, 3.9 times the 2008 figure.

“In Singapore, the current legislated maximum interest rate for pawn loans of 1.5 per cent a month is one of the lowest worldwide, which partly accounts for its popularity here,” said Yeah Lee Ching, executive director of ValueMax Group.

It’s not just individuals who are cash-strapped. Credit-starved companies in Vietnam are even selling cars and putting up their offices as collateral to stay afloat.

“Since the economic crisis in 2009 up until now, the number of business owners that have come to us has increased remarkably,” said a pawnshop owner in Hanoi.

With some bank lending rates at more than 15 per cent, an estimated 120,000 small and medium-sized businesses had stopped operating since 2011, many due to the lack of credit from state-run banks saddled with bad debt. A Vietnamese newspaper put the number of pawnshops at 2,710 in Hanoi alone.


In Malaysia, pawnbrokers are typically run by ethnic Chinese families, but more government-linked firms have entered the business to cater for hard-up Muslim Malays.

Pos Malaysia Bhd, the national postal service, branched into the Islamic pawnbroking business or Ar-Rahnu in July 2012. “The business is already contributing to profits,” chief executive Iskandar Mizal Mahmood said.

Singapore’s MoneyMax, which has pawnbroking and jewellery retail businesses, reported net profit of S$5.8 million last year, five times the 2010 level. The company, which has 29 outlets, also plans to open a few more in the next 12 months.

Its pawnbroking business enjoys pre-tax profit margins of more than 30 percent due to the high frequency of transactions, chief executive Peter Lim told Reuters, while handling an intricately designed gold belt that he said had probably been a family heirloom before it was pawned.

“I loan $1,000 to you, within three weeks you’ve paid me back already, and I’ll loan it to another person. That’s why you see this kind of margins, the money keeps going back and forth,” Lim said.

One of the biggest risks for pawnshops in the region is their exposure to the price volatility of gold, a favoured item for customers to pawn. Gold hit a record high of about US$1,920 (NZ$2393) per ounce in 2011 as central banks around the world launched stimulus measures, but has fallen off to about US$1,390.

However, analysts said this doesn’t detract too much from the business fundamentals of pawnshops.

“If you’re talking about the business model of pawnshops, it’s a fairly good business. It has steady growth,” said Song Seng Wun, regional economist at CIMB Research. “There’s always that pool of people who go in and out of pawnshops.”

– Reuters


Shane’s Pawn Shop, Inc

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