|Pawn shops thrive on indebted Singaporeans
Singaporean housewife Siti Khadijah Abdul Rahman accumulated a few thousand dollars' worth of gold accessories over the past two decades, but now a rising cost of living is forcing her to pawn them.
With a stretched household budget that must also cater to school expenses for her two teenaged children, the 49 year-old is pawning her gold to relieve pressure on her security guard husband, who earns S$1,500 (US$1,211) a month, AFP reports.
“Pawning is better than going to friends or family when you have budget problems,'' said Abdul Rahman. “When I have money, I will claim it back.''
She is one of a rapidly increasing number of people opting to take short-term pawn shop loans to try to keep up with rising prices, in what the Economist Intelligence Unit has ranked the world's sixth most expensive city to live in.
Singapore's pawn shop industry has seen phenomenal growth. Loans surged to S$7.1 billion in 2012, up 43 percent on-year, according to industry registry data.
The three major pawn shop chains – which make up the bulk of the nearly 200 pawnshops across the island of 5.3 million people – have sought to take the shame out of using personal property as collateral for short term loans.
“You look around you, this is probably one of the most expensive places in the world,'' said Derek Da Cunha, a local socio-political observer.
“Without the stigma [of borrowing], pawnshops have become more respectable and we have working professionals using it as a means to get short-term loans to cope with their expenses.’’
People who pawn their goods have the items assessed by shop experts, and the loans the shops grant usually carry an interest rate of 1 percent in the first month, then 1.5 percent a month thereafter.
Items must be redeemed within six months or their are forfeited, unless the borrower renegotiates a loan.
Valuemax and rivals Moneymax have thrived, both in fierce competition with the fast-growing Maxi-Cash, whose initial public offering in June last year raised S$16.8 million despite weak market conditions.
Store fronts with iron grills that used to be a mainstay in pawnshops have been replaced by outlets that boast uniformed staff and resemble commercial bank branches.
But younger and more affluent customers, unperturbed by the stigma once associated with pawnshops, have also become an important clientele for an industry that has softened its image with endorsements from local celebrities.
Apart from gold, they also pawn diamonds, rare gems and antique watches.