Pawnshops doing big business as public seeks quick cash
Pawnshops doing big business as public seeks quick cash
JAKARTA (JP): With no money to buy basic commodities and pay
day still a week away, Tuti was at her wit's end.
How could she get her hands on some cash? Go to the bank?
Swallow her pride and borrow from a friend or relative?
Instead, she chose to hock some of her belongings at the
pawnshop.
After all, procedures at the shops, called pegadaian in
Indonesian, were relatively simple. She was not required to leave
her land certificate or house title, like she would have at the
bank. All she needed was a copy of her ID.
And the pawnshop would accept almost any item, from
electronics to jewelry.
Another woman, Nuraini, pawned several sarongs after finding
herself in the same predicament as Tuti.
"The situation is very critical, especially due to the
increase in food staple prices, mainly rice, these past few
days," said the 37-year-old.
Rachman gave another reason for visiting the Senen branch of
the pegadaian in Central Jakarta.
"I am used to pawning goods like gold, electronics and
motorcycles. The money is used for additional work capital,"
Rachman, who sells used clothing in the Senen market, told
Antara.
Rachman said he always managed to redeem his goods because the
borrowing duration could be extended by only paying the interest.
He listed the benefits of using the pawnshop -- the procedures
are easy, it is sufficient to show an ID card, interest is
relatively small and goods are safe at the shop.
Spokesman for the Central State-owned Pawnshop, Soeparto, said
many people seeking quick credit chose pawnshops because the cost
was relatively cheap.
Interest is one-tenth of 1 percent for loans over Rp 10
million, or 1.75 percent for 15 days.
When repayment of credit is due and the customer has not come
to settle, pay an installment or extend the loan, collateral
goods will be auctioned after five months.
The pawnshop arranges the auction, with public announcements
made on the radio and posted on bulletin boards.
Following the auction, a customer is entitled to any surplus
amount after deductions are made for the loan, interest and the
cost of the auction, Soeparto said.
History
A lending institute under a pawnshop system was introduced
here by the Bank van Lening (lending bank) during Dutch colonial
times.
It remains a fast and efficient means of helping people out of
short-term monetary snags.
In the Dutch East Indies, pawnshops were a monopoly of the
government. The first state pawnshop was established in Sukabumi,
West Java, on April 1, 1901, which is commemorated as Pawnshop
Day.
Soeparto said the fundamental objective of the pawnshops -- to
meet the community's need for funds by extending loans according
to their regulations -- has not changed over time.
The goal, he said, was to protect the community from usury and
ijon practices, the latter referring to the once common activity
of speculatively selling rice long before the harvest.
He said pegadaian were classified as an agency after
independence. In 1961, they became state-owned companies and
eight years later functioned as a service company.
They have made remarkable progress, mainly with the
implementation of the tight money policy and with banks
increasing interest rates to an extremely high level.
In 1995, the assets of the business amounted to Rp 529.27
billion only, with a net profit of over Rp 17.2 billion. Just a
year later, the amounts were, respectively, Rp 647.03 billion and
more than Rp 33.96 billion.
In 1995, there were 4.76 million customers registered at its
branch offices nationwide, with loans up to Rp 1.4 trillion.
In 1996, there were 5.03 million customers borrowing more than
Rp 1.7 trillion, Soeparto said.
All levels of society use the pawnshop services, he added,
because the urgent need for funds was not a monopoly of the poor.
However, in line with its mission, the pawnshops do give priority
to the economically disadvantaged.
Their market has penetrated the higher income bracket in
particular regions like Jakarta, Soeparto said. For many of the
wealthy but financially strapped, pawnshops have become an
attractive alternative.
This is even more evident since the monetary crisis beset the
country several months ago. Judging from goods given as
collateral -- among them luxury cars -- it is clear that pawnshop
customers are from all levels.
Soeparto quoted the agency's managing director Sjamsir Kadir,
who said the management attempted to adapt and change with
developments in the community through improving its own
administration.
To determine the company's direction in the future, Soeparto
said, the company's policy in managing the agency and its 5,183
employees was to make it a modern and dynamic financial
institute, with skilled and professional human resources.