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.