Parents seek quick loans at pawnshops

Leo Wahyudi S, The Jakarta Post, Jakarta

With the new school year beginning, parents are facing increased financial demands. Those parents unable to come up with their children's school fees are forced to turn to pawnshops to raise the necessary cash.

As the school year approaches, business at the Pasar Senen Pawnshop in Central Jakarta has been on the rise, with parents lining up at the counters to raise some cash.

Barudi, who lives in Tangerang, said he was pawning his wife's necklace to get some quick cash to pay the school fees for his son, who is beginning elementary school.

"I have to pay Rp 1 million. I don't have that kind of money at the moment," he said.

Ninety percent of the items pawned here are jewelry. But there are also electronic goods and computers, as well as a couple of motorcycles and cars.

The pawnshop receives an average of 500 grams of gold jewelry a day. In July, however, this figure has risen sharply to 850 grams.

People who pawn their jewelry receive the cash equivalent of about 88 percent of the estimated value of the item. The estimated value is between 70 percent and 83 percent of the market value of the jewelry.

Despite these lower price, many people have no objections.

"Selling your jewelry here is much safer and it is an easy way to get fast cash," one customer, Lely, said. "Despite the low prices, I think it helps us a lot, especially as we are in need of instant money."

Lely, who used to work at a private bank, said that if you went to the bank for a loan, it would take a month.

At the pawn shop the entire process only takes about an hour, with a maximum 14 percent interest for four months. After four months, a customer may extend the agreement.

Heri Kisriyanto, the head of the Pasar Senen Pawnshop, one of 67 pawnshops in Greater Jakarta, told The Jakarta Post that in June the pawnshop disbursed more than Rp 4 billion, compared to Rp 3.858 billion in May. And as of July 11, it had disbursed Rp 1.9 billion for the month.

This year, it has disbursed Rp 25.2 billion, while from January to July last year it disbursed Rp 26.7 billion.

According to Heri, an average of 564 customers came to the shop each month this year, or about 18 people a day.

Almost half of them (45 percent) are employees at private companies, while the rest are housewives, students, traders, fishermen and farmers.

"They mostly need the money to develop their businesses or to pay school fees," he said.

"If a customers does not come to reclaim their goods after four months or to extend the agreement, the pawned items will be sold in auction," he said.

About 10 percent of customers fail to reclaim their goods.

One customer, Yustia, who lives on Jl. Gajah Mada in West Jakarta, had come to the pawnshop to reclaim a necklace she had pawned three months ago.

"I had to keep a close eye on our family finances and my husband, who is a street vendor, also worked really hard to be able to reclaim the necklace," she said.