pawnshops research

8/10/2019 Pawnshops Research

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Pawnshops

PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, Q.C.

1029-Aurora Blvd. Cubao, Q.C.

Selected Pawnshop Businesses along

Sumulong Highway, Marikina City:

Factors of Success

Submitted by:

Leira Susana Arceo Escala

Charmaine Santos Tesalona

Mariel Navata Nieto

John Michael Temporal Soria

Ralf Louise Sauro Vico

Submitted to:

Dr. Carolina D. Ditan

Table of Contents

Title Page

Acknowledgement

List of Tables

List of figures

Chapter I Introduction

Background of the study


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Theoretical Framework

Research Paradigm

Statement of the Problem

Hypotheses of the Study

Significance of the Study

Scope and Delimitations

Definition of Terms

Chapter II Review of Related Literature

Foreign Literature and Studies

Local Literature and Studies

Chapter III Research Methodology

Research Design

Sampling Design

Research Instrument

Data Gathering Procedure

Statistical Treatment

Chapter IV Presentation, Interpretation and Analysis of Data

Chapter V Conclusion and Recommendations

Summary

Conclusion

Recommendation

Bibliography


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Appendix

Appendix I. Letter to the respondents

Appendix II-A. Questionnaire for customers

Appendix II-B. Questionnaire for employee/staff

Appendix III. Vicinity Map

Acknowledgement

We would like to thank our beloved Dr. Carolina D. Ditan, Dr. Emma Guno,and Dr. Mendoza. To them we will always be grateful. Their contribution tothis study will transcend this time and age.

Allow us to thank also our fellow student of Philippine School of BusinessAdministration QC. For the materials that they submitted which wecompiled to complete this study about pawnshop. Studying this problem isnot easy if our Professors in PSBA did not help us in this study. Thank you

beloved Professors for being always available for us. Thank you friends. I

truly value our friendship. Likewise many thanks to Dr. Ditan our Professorin fundamental research for giving us knowledge about the study that weconduct.

Specially thanks to this people Malipayon, Edwin Rama, Joey Barroga,Carina Leonore Ngo Ng, Josefa P. Tombali, Remigio A, De Ungria, Jr,Elizabeth Kuria, Nastaran Abizadeh for allowing us to study the case thatthey made in the past few year.

To all our friends who touch our lifes this is for us.

To our beloved Parents, Nanay and Tatay, who are the potent source ofour strength and will power, We give you this study as a gift and proof of

our appreciation for all your sacrifices.

We give back our loving CREATOR what he has given for us.

CHAPTER I

THE PROBLEM AND ITS BACKGROUND


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Introduction

Pawnbroking existed in the Ancient Greek and Roman Empires. Mostcontemporary Western law on the subject is derived from the Roman

jurisprudence. As the empire spread its culture, pawnbroking went with it.Likewise, in the East, the business model existed in China 3000 yearsago no different than today, through the ages strictly regulated by Imperialor other authorities.

In spite of early Roman Catholic Church prohibitions againstcharging interest on loans, there is some evidence thatthe Franciscans were permitted to begin the practice as an aid to the poor.Pawnbrokerage arrived in England with William the Conqueror, but knownby the Italian name, Lombard. In 1338, Edward III pawned his jewels to

raise money for his war with France. King Henry V did much the same in1415. The Lombards were not a popular class, and Henry VII harried thema good deal. In the very first year of James I Stuart an Act againstBrokers was passed and remained on the statute-book untilQueenVictoria had been on the throne thirty-five years. It was aimed at the manycounterfeit brokers in London. This type of broker was evidently regardedas a fence. It is also known that Queen Isabella of Spain pawned her

jewelry in order to send Christopher Columbus out to what he believed wasthe Indies.

Pawnshop is a business that offers secured loans to people, with itemsof personal property used as collateral. The word pawn is derived fromthe Latin pignus, for pledge, and the items having been pawned to thebroker are themselves called pledges or pawns, or simply the collateral. Ifan item is pawned for a loan, within a certain contractual period of time thepawner may purchase it back for the amount of the loan plus some agreed-upon amount for interest. The amount of time, and rate of interest, isgoverned by law or by the pawnbroker's policies. If the loan is not paid (or

extended, if applicable) within the time period, the pawned item will beoffered for sale by the pawnbroker/secondhand dealer. Unlike otherlenders, the pawnbroker does not report the defaulted loan on thecustomer's credit report, since the pawnbroker has physical possession ofthe item and may recoup the loan value through outright sale of the item.


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The pawnbroker/secondhand dealer also sells items that have been soldoutright by customers to the pawnbroker or secondhand dealer.

Background of the study

Marikina City is the home to a number of industries, some of which are thebiggest and most successful in their fields. Shoe manufacturing is the bestwell-known industry.

The city manufactures food, cigarettes, porcelain and chinaware,confectionery, automobiles and cars, appliances, electronics, crafts likebags, hats and slippers, and most of all, shoes.

Marikina was a highly industrialized city because of its well known shoe

industry. The manufacturers earn a high profit that they can buy their ownproperties, jewelries and other personal stuffs. The shoe industry declineddue to the imported items especially shoes that flooded the market thattime. To be able to recover the capital that was lost, they pawned some oftheir jewelries. By means of these so called pawnshops, people used tofind ways on how they could exchange their jewelries for money.

Theoretical framework

The pawning process begins when a customer brings an item into a pawn

shop. Common items pawned by customersinclude jewelry, electronics, musical instruments, and tools (both hand toolsand power tools). Gold, silver, and platinum are popular items which areoften purchased; even if the source (such as a piece of broken jewelry) haslittle value, the metals can still be sold in bulk to a bullion dealeror smelter for the value of the gold, silver, or platinum content.

The pawnbroker assumes the risk that an item purchased was actuallystolen property. However, laws exist in many jurisdictions that protect both

the community at large and the brokers from unknowingly engaging incriminal activity (buying and selling stolen goods, also known as "fencing").In some jurisdictions, pawnshops must give a list of all newly pawned itemsand any associated serial number to police, to allow the police to determineif any of the items have been reported as stolen. Some pawnshops set uptheir own screening criteria to avoid buying stolen property.


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The pawnbroker assesses an item for its condition and marketability bytesting the item and examining it for flaws, scratches or other damage.

Another aspect that affects marketability is the supply and demand for theitem in the community or region.

To assess the value of different items, pawnbrokers use guidebooks,catalogs, Internet search engines, and their own experience to subjectivelyevaluate the goods. Some pawnbrokers have training in the identification ofgems, or they employ a specialist with gem training to assess jewelry. Oneof the risks when accepting secondhand goods is that the item may becounterfeit. Once the pawnbroker has determined that the item is genuineand not likely to have been stolen, and that it is marketable, thepawnbroker offers the customer an amount for it. The customer can either

sell the item outright if the pawnbroker is also a licensed secondhanddealer, or offer the item as collateral.

The Pawn Shop wages general pawn brokering services to the generalpublic, which includes providing small collateral loans to individuals basedon the value of the property that they bring into the Companys store. The

business specializes in making loans that are specific to jewelry.

Pawn Shops typically operate with a strong say of economy stability asthese lenders are often used as a last resort among borrowers that are in

need of swift loans or do not have the capability to sell the merchandisethat they can use as collateral. As such, the business should be healthy toremain profitable and cash flow positive in any economic environment.

OUTPUT

A Successful Pawnshop Business

* Accessible location

* Quick Processing

* Quality Service

* Provide higher value for pawned items

* Low interest rate


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Marketing Strategies

* Advertising through news, print or media

* Sponsorship of events

* Loyalty Discount

* Usage of internet

* Tying up with bank institutions

OUTPUT

A Successful Pawnshop Business

* Accessible location

* Quick Processing

* Quality Service


* Low interest rate

Marketing Strategies

* Advertising through news, print or media

* Sponsorship of events

* Loyalty Discount

* Usage of internet

* Tying up with bank institutions

PROCESS

1. Strenghts

* Accessibility of the location


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* Low interest rate

* Quick processing


* Quality service

2. Weaknesses

* Inaccessiblility of the location

* High interest rate

* Slow processing

* Lower value for the pawned items

* Poor service

3. Opportunities

* Add-on service

* Improvement of faciliies

* Additional branches

* Increasing number of customers

* Economic crisis

4. Threats

* Burglary/robbery

* Competition from huge chain outlet

* Unsafe surroundings / environment

* Many competitors

* Economic stability


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PROCESS

5. Strenghts

* Accessibility of the location

* Low interest rate

* Quick processing


* Quality service

6. Weaknesses

* Inaccessiblility of the location

* High interest rate

* Slow processing

* Lower value for the pawned items

* Poor service

7. Opportunities

* Add-on service

* Improvement of faciliies

* Additional branches

* Increasing number of customers

* Economic crisis

8. Threats

* Burglary/robbery

* Competition from huge chain outlet


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* Unsafe surroundings / environment

* Many competitors

* Economic stability

INPUT

Manager

-Supervise and manage the overall performance of staff.

Employee

- Provide quality service

Customers

-They are looking for a pawnshop that is accessible and provide lowinterest rate

INPUT

Manager

-Supervise and manage the overall performance of staff.

Employee

- Provide quality service

Customers

-They are looking for a pawnshop that is accessible and provide lowinterest rate

Figure 1. Research Paradigm

In the research paradigm, the present study was made to study themarketing strategies and the success factors of the pawnshop business.On the first component we will look on how this study will influence themanagers, employees, and the customers. The factors from which thestrenghts, weaknesses, opportunities, and threats will determine by


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conducting a survey using a questionnare as the research instrument. Theinformations that will be gather after the survey will undergo in a evaluationthat may indicate the factors that greatly affect the success of thepawnshop business.

Statement of the problem

This research study assessed the success factors of the SelectedPawnshop Busibessses along Sumulong Highway, Marikina.It soughtanswers to the following questions:

1. What are the strengths of the Pawnshop business?

2. What are the weaknesses of the Pawnshop business?

3. What are the opportunities of the Pawnshop business?

4. What are the threats to the Pawnshop business?

5. What are the marketing strategies used by the pawnshop?

6. Is there a significant difference among opinion of the respondentsregarding the strengths and weaknesses of the Pawnshop business whengroup according to age?

7. Is there a significant difference among the opinion of the respondentsregarding the strengths / weaknesses of the Pawnshop business whengroup according to gender?

Hypotheses

Alternative

-There is a significant difference among opinion of the respondentsregarding the strengths and weaknesses of the Pawnshop business whengroup according to age.

-There is a significant difference among opinion of the respondentsregarding the strengths and weaknesses of the Pawnshop business whengroup according to gender.


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Null

-There is no significant difference among the opinion of the respondentsregarding the strengths / weaknesses of the Pawnshop business whengroup according to age.

-There is no significant difference among the opinion of the respondentsregarding the strengths / weaknesses of the Pawnshops business whengroup according to gender.

Significance of the study

This study will be beneficial to the following:

1. Owner of the pawnshop

* The owner/s will be able to identify the customers needs and wants.

* The owner/s will be able to know what to improve and change in thebusiness.

2. Customer

* To know further about the services offered by the pawnshop.

* They will be able to choose wisely which pawnshop can give them thequality service that they need.

3. Community

* To improve the mindset of the people towards the pawnshop business.

4. People engaged in the business

* This will serve as a guide on how they will run the business towards their

success.

5. Future researchers

* This research may serve as a guide or reference to future studiesregarding this business to related studies or another thesis.


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Scope and Delimitations of the study

This study involved 6 pawnshop businesses located along Sumulonghighway in Bayan, Marikina namely: Cebuana Lhuillier Pawnshop, MamasPawnshop, 18th jewelry pawnshop, RR Pawnshop, Capital Pawnshop andTambunting Pawnshop. The respondents of this study will 6 managers, 13staffs and 52 customers of these pawnshops. The research study will coverthe period from Aug to Oct 2011.

DEFINITION OF TERMS

Appraiseto make or give an estimate of how much miney something isworth.

Auction - a sale of goods or property at which intending buyers bid againstone another for individual items, each of which is sold to the bidder offeringthe highest price.

Collateralproperty or goods used as security against a loan and forfeitedif the loan is not repaid.

Counterfeit- made as a copy of something, especially money, in order todefraud or deceive people.

Credit- an arrangement by which a buyer can take possession ofsomething now and pay for it later or over time.

Interest- a charge made for a loan or credit facility, or a payment made by abank or other financial institution for the use of money deposited in anaccount.

Lending- allowing a person or a business to use a sum of money for aparticular period of time, usually on condition that a charge interest is paidin return

Loanan amount of money given to somebody on the condition that it willbe paid back later.

Pawn brefers to an item of value which the pawner leaves as securitywith the pawnbrokerin return for a loan.


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Pawneerefers to a pawnshop or pawnbroker.

Pawnerrefers to the borrower from a pawnshop.

Pawnshop/Pawnbrokerage refers to establishment engaged in the

business of lending money on personal property delivered as security forloans.

Remittance- money sent as payment for merchandise or services.

Transactionrefers to pawnshop activity per pawn ticket.

CHAPTER II

REVIEW OF RELATED LITERATURE AND STUDIES

Related LITERATURE

Foreign Literature

Signs of an economic turnaround are showing up at some Georgia pawnshops. - ALBANY, GA (WALB)

They're often a good indicator of economic prosperity because manypeople use them like banks for loans or cash advances.

For the last year, pawn shop owners say most of their customers havebeen pawning items to get quick cash. There's still a lot of that happening,but store owners say they're starting to more shoppers looking for bargainson items many would consider luxuries.

A large number of customers spending money has been rare during therecession. Most of their customers have been pawning their items to getby.

Many people are still pawning items. Some shops have become moreselective, taking only the newest and best name brand items. But storeowners say the increase of customers spending money is the first positiveeconomic sign they have seen in months.


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The store's redemption rate has been close to 70% recently, meaning mostpeople are able to pay back their loans and recover their pawned items.

Pawn Shops Attract More Customers

Glowing third quarter results from EZCorp (EZPW)on Thursday followedsimilar news from Cash America (CSH) earlier in the day, hinting that thesudden restriction of credit from banks is pushing more consumers to theirlocal pawn shop. First Cash Financial Services (FCFS) had the same storyon Wednesday.

EZ Corp reported a net income of $20 million, which was up 39 percentfrom the same quarter a year ago. US pawn lending drove a lot of that gain.Operating income rose 36 percent in domestic stores. Granted, EZCorp

bought 13 new stores, but according to their conference call, most of thosenew stores were only integrated during the last part of the year. So, asbright as things are for EZCor, it may get even brighter.

It is less a critique of pawn shops and more a reflection of the lack of creditavailable to many Americans at mainstream financial institutions. Creditcard issuers are cutting back credit lines, banks and thrifts are makingfewer mortgage loans, and businesses are struggling to get loans. Each ofthese factors contributes to less money available for hiring, for buying

goods, and for shoring up home prices.

Pawn shops seem to have some clear advantages over payday lendersright now. Both Cash American and EZCorp work in both business, butpawn is the hot ittem. Morecollateral items are coming in, and most aregoing back out. EZCorp had an 81 percent redemption rate. That meansthat they get a nice margin on the short-term transaction, but they alsobenefit from a customer that is likely to come back next month with thesame tool set, wedding ring, or childrens bike.

As if to underscore the diverging opportunities, First Cash has been sellingor closing its payday stores. Now they only have payday in Texas andIllinois. It is interesting that they would choose to say in Illinois,where recent legislation attempts to rein in payday lending.


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Pawn shops have a second thing working for them theyre able to gainfrom the price of gold.

There appears to be a lot of consolidation, as well as expansion of newstores. Cash America has opened 81 stores in 18 months. EZCorp hasopened 70 in the last 12 months, and they just purchased 13 stores inChicago and Florida. Oh, and everyone is trying to get more exposure toMexico.

The banks are doing nothing to thwart this trend. Eliminating free checkingis only going to move more consumers out of the banking system. Whenyou consider that it was taxpayers that shored up the capital base of thebanks, the abandonment of so many families reflects poorly. In 2009, theFDIC said that one in four adults was un-banked or under-banked. Pawn

shops are one of their new destinations.

For pawn shops, fake goods are deadly enemies |

The increasing skill of forgers of designer goods is hastening the end forpawnbrokers.

Pawnshop owners scoff at such stories now. The tearjerker tales are nolonger part of the job; everything nowadays is about trying to tell whats realand whats fake, and the fake goods keep looking more real.

A group of scam artists went around to 26 pawnshops in Seoul puttingdown golden pigs as collateral to borrow over 100 million won ($106,000).The pigs were actually made of lead and coated with gold, but theyweighed the same as solid gold and the pawnbrokers fell for it. Thescammers were eventually arrested.

Pawnbrokers never share their secrets about distinguishing fake goods toother brokers. Being fooled by fake goods, it seems, is the only way to

learn; there are no schools that teach the subject. A common item inpawnshops these days is a golf bag with a full set of clubs. Men leave theirgolf bags at the counter and borrow money at the beginning of the week.They then pay back the loan on Friday and go golfing over the weekend.On Monday, they come back to do it all again.


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Prices at pawnshops are set to wholesale figures. For gold, silver anddiamonds, pawnbrokers pay 80 to 90 percent of the items wholesale price.For cell phones and digital cameras, one can get 60 to 70 percent of thewholesale price, because digital products become outdated within three

months of being released on the market.

There are rules for interest rates as well pawnbrokers cannot ask formore than the legal monthly interest rate of 5.5 percent.

Pawnshops living on borrowed time due to lack of interest

One of the country's last remaining pawnshops, Carthy Pawnbroking Ltd, isto be found on Marlborough St and it too looks a world away from the ultra-swish retail outlets on the other side of O'Connell St.

From the outside, it looks like a downmarket jewellery store. There is aseparate entrance for the pawnshop and a worn stretch of linoleum bringsyou down to a single counter with a heavy metal grille in place to protectstaff. The furnishings are old-fashioned and far removed from the fittingsyou would expect in normal lending institutions, like banks.

Only four licensed pawnshops currently operate in Ireland - a far cry from1904, the year in which James Joyce's Ulysseswas set, when there were500 official pawnbrokers in Dublin alone.

"There's no doubt that fewer people are using pawnshops today," Carthysays. "There are far more sources of credit than there was 20 years agowhen I started running this business. Just look at the number of creditcards that are issued every week. Moneylenders are doing big business."Previously, Saturday was the busiest day for Carthy's. Now, the pawnshoponly opens on weekdays.

The Irish experience is very different to that of the UK, where pawnshops

are booming. According to the National Pawnbrokers Association, theBritish market is worth 100m per annum and is serviced by 700pawnshops.

This week, Britain's biggest pawnbroking chain, Albemarie & Bond,reported a 14pc increase in profits in a year. The firm, which has 65 stores,said an increasing number of people on lower incomes, as well as those


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Spain is said to have pawned her jewels to finance Christopher Columbus'strip to America.

In the interim, the business has acquired a slightly less auspiciousreputation and for many conjures up images more reminiscent of aDickens' novel than a bona fide credit facility licensed by the Department ofConsumer Affairs.

There is little to stop operators from setting up shop in Ireland. According tothe Director of Consumer Affairs, Carmel Foley, persons must not have acriminal record or tax arrears, and must be, in legal parlance, "fit andproper" and run secure premises.

In 2002, the Director of Consumer Affairs issued a licence to a fifth

operator, but it was not renewed the following year - a sign thatpawnbrokers may really be on their last legs.

Business Focus: Licensed pawn shop starts to thrive

The largely empty shelves and relative quiet yesterday in Cash-U-Up, apawn shop at PGCT Center on Phnom Penhs Street 274, betrays what

has become a thriving business in the few short months since it firstopened.

Between last August and now, the company has managed to grow its loanportfolio to US$1 million, and management is shooting for between $3million and $4 million by the end of 2011.

Those are strong numbers for an industry that became licensed inCambodia only in 2010. Cash-U-Up was the fourth pawn shop to belicensed in the Kingdom.

Cash-U-Up seems to have capitalised on the Kingdoms need for pawn

services that operate in a regulated environment, but management insiststhat profit is not its top priority.

We dont think it is the major driver that motivated us to operate the

business, said Puthkiry Kim, Chief Executive Officer of Cash-U-Up owner,Vestal Holdings.


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To help the economy as a whole, to help the low-income people inCambodia is the companys goal.

Altruism aside, the numbers dont lie. There is money to be made in the

legal pawn industry, money enough to possibly lure unlicensed shops outof the shadows.

That, along with a general discouragement of trading in stolen goods, wasthe goal when a law was passed back in January of last year demandingthat all pawn shops be licensed, the government has said.

Cash-U-Up is a joint venture between Singaporean investor Steven Lamand Cambodia-based Vestal Holdings, which operates a wide variety ofbusinesses in the Kingdom. Its primary function is to loan smaller amounts

of money to customers in return for holding collateral of some sort, whetherelectronics, jewelry, motorbikes or cars, though the shop is licensed tosell the items once people renege on their loans.

People trade valuable goods for temporary credit and later reclaim theirpossessions when theyve raised the initial loan amountplus interestforCash-U-Up. Largely, these are people who may not have access to bank orother kinds of financing.

Still, that hasnt prevented him from loaning large sums of cash. The law

states that pawn shops loans are capped at 20 percent of a companyscapital investment. Given that Cash-U-Up started with $500,000, thatmeans Vong Tith Phearoka can hand out as much as $100,000 toborrowers. And he said he has.

Faced with competition from unregulated shops, Puthkiry Kim said twoimportant things keep customers coming through his doors: a low interestrate and the promise of security.

Cash-U-Up offers loans at 2 percent to 3 percent, depending on the client,while illegal pawn brokers might ask for 4 percent or more.

He offers the same guarantee that borrowers belongings will remain safeuntil they return for them.


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lending money and the way of conduct is virtually still the same.This means that most processes at a pawnshop are manual. Owners ofSMEs (Small and Medium sized Enterprises, pawnshops included) oftenassume that their business is unique and not fitted for incorporating

informational technology such as Internet. This belief often proves to beincorrect

making the business less effective andtherefore less competitive.The purpose of this thesis is to investigate and, if possible,suggest possibleimprovements for the pawnshop business.

By studying Swedish laws and legislation and examining solutions that afew Swedish pawnshops are using, a detailed description of workprocesses were made. These were used to create a new and improved

work processes focusing on lowering manual workload, in other wordsreducing the demand for human input and involvement. This researchshows that the processes at a pawnshop

are actually very fitted for Internet. A big portion of the manual work can bemade more effective and in some cases even automatic. Thesemostly concern CRM (Customer Relationship Management) which is anmajor part of the workload. An interesting detail that appeared was that thepawnshop

business, when deconstructed into processes, was not that uniqueor complicated as it might seem.

Local Literature

Bold Philippines pawnshop heists continue

When it comes to pawnshop security, the best defense is a good offense. Ifyou own a pawnshop, make sure you understand that it is up to the you

to protect your businesses. MIM Pawnshop Sills and Services alwayspromotes being a proactive business owner. Experience teaches that it isimportant that a pawnshop owners learn to assess their businesses for itsshortcomings.

Back in 2010, we posted an article on pawnshop security when a rash ofbold robberies of pawnshops were being reported on by the Philippine


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regular basis their barangay tanods for routine patrols during the night untilthe wee hours of the morning.

Barangay officials should closely coordinate with and immediately report tothe local police any suspicious movements or persons roaming in areasnear the said establishments so that the latter can undertake more in depthsurveillance and make the necessary arrests, he said.

Philippines: Regulator tightens watch on pawnshops

Citing the proliferation of pawnshops across the country, the BangkoSentral ng Pilipinas has issued a circular amending and tightening existingregulations governing small lenders.

The central bank issued Circular 711, an amendment of a previousmeasure, stressing the need for officers and employees of pawnshops toundergo training on the BSPs regulations and anti-money launderingefforts.

Through money laundering, criminals can make it appear that their dirtymoney come from legitimate sources.

Since many pawnshops are now into the business of facilitatingremittances, regulators said they should also be required to report to

authorities suspicious transactions, such as sending and receiving cashfrom dubious sources.

Circular 711 likewise states that assets of pawnshops and items turnedover by borrowers as collateral for loans must be insured by companiesaccredited by the Insurance Commission.

This is to protect the public against loss of pawned items resulting fromtheft and fire.

In the circular, the BSP has also identified people who should not bedesignated as directors or officers of pawnshops.

These include individuals convicted of offenses like estafa, embezzlement,extortion, forgery, swindling, theft, robbery, and violators of graft andcorrupt practices.


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The BSP also prohibits persons found to have violated banking laws orother regulations enforced by other regulatory agencies from beingdirectors of pawnshops.

The pawnshop industry in the country has grown and developed over theyears. Apart from lending, most shops now offer other services such asbills payment and facilitation of remittances.

The BSP said enhanced monitoring of pawnshops would be necessarygiven the phenomenal growth of the industry.

Pawnshops lifeline in hard times

THE massive job cuts being implemented by manufacturers and exporters

amid the global economic crisis may lead to an increase in the number ofunredeemed pawned items.

The chamber represents about half of more than 14,000 pawnshops in thecountry, including the big Lhuillier and Tambunting chains.

Ablaza says workers, who may have acquired a few assets during the goodyears, may resort to pawning. But without regular employment they will betoo hard up to redeem the items.

Then pawnshops will have a problem because we do not expect a marketfor foreclosed assets. Who will buy them? But this is assuming our clientsstill have items to pawn,? he says.

Ablaza estimates that 95 percent of pawnshops serve Filipinos who wouldotherwise have no access to credit. Their clients can?t open bank accountsbecause the minimum balance required is too steep, or because they haveno permanent address. So they don?t normally qualify for credit cards ormembership in savings and loan associations that have strict savings

requirements.

Jewelry, cell phones

Pawnshops often provide loans from P1,000 to P2,500, with jewelry, cellphones and appliances commonly used as collateral. Interest rates


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average 4 percent to 5 percent a month, with a minimum term of 30 days,renewable monthly.

If the borrower does not redeem the pawned asset when the loan falls due,all he has to do is pay the interest for the next month to keep the loancurrent. Loans for which interest has not been paid 90 days after maturityare deemed expired and pawnshops are authorized to sell the items torecover their cash.

Remittance centers

Looser credit card requirements in the last 10 years have led to easieraccess to cash, resulting in a general decline in the traditional pawnshopbusiness. This has caused many pawnshops to also act as remittance

centers, offering its storefronts as pickup centers for cash sent by overseasworkers to their families.

We noticed that more and more pawnshops have had to double asremittance centers. At first, it was considered an add-on service becausepawnshops are quite accessible. But now, more than half of the businesscomes from remittance services instead of pawns,says Ablaza.

He says members of the chamber observed that 2008 remittances weresofter, or did not grow as fast as they did in 2007. In addition, pawnredemption that normally occurs in December when people supposedlyhave extra cash did not happen. Rather, more clients came in to pay loaninterest than redeem their jewelry.

We saw a combination of two things that offer a bad prognosis for thebusiness: remittances came in but the volumes were not as much as wehad expected; and clients probably did not have as much cash as theywanted because they did not redeem their pawns. It?s going to be a toughyear,? Ablaza says.

For this reason, the industry expects generally flat loan volumes in 2009.

Unlike in the United States where pawnshops are experiencing a lot ofactivity because of a recession, the Philippines is not feeling the [full bruntof the] recession yet. This could be why we are not seeing an increase in


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pawns. Or it could also be because people no longer have anything topawn,Ablaza says.

High-end market

Still, there is a segment of the pawnshop industry that will likely experiencea boom: the high-end market.

Ablaza acknowledges that niche players that focus on the affluent can lookforward to more business in 2009, but remains mindful that the greatermajority of pawnshop clients will be hard up.

License plate

A Bangko Sentral ng Pilipinas mapping operation has found that 26 percentof pawnshops are not registered, most of them located outside MetroManila.

This presents a risk to consumers as unregistered pawnshops may close atthe drop of a hat and clients will have no one to run after for their pawneditems.

It is important, thus, to look for the Bangko Sentral-issued pawnshoplicense plate to ensure that the pawnshop is legitimate and authorized to do

business.

Most of those found unregistered have actually applied for licenses,according to Ablaza.

BSP tightens rules on pawnshops

MANILA, Philippines The Bangko Sentral ng Pilipinas (BSP) has issuedtigther rules on the operations of pawnshops all over the country tosafeguard its assets particularly of pawned items.

BSP Governor Amando Tetangco Jr. issued BSP Circular 711 series of2011 amending the Manual of Regulations for non-bank financialinstitutionsPawnshops under Circular No. 656 dated June 2009.


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Also prohibited are directors and officers of banks found by the BSPs

Monetary Board as administratively liable for violation of banking or otherrelevant laws, rules, and regulations where a penalty of removal from officeis imposed.

The BSP added that a new pawnshop applying for an acknowledgement ofregistration with a minimum paid up capital of P100,000 may open onebranch subject to compliance with applicable branching requirements.Every branch of a pawnshop should pay a one-time processing fee ofP1,000 and P500 annual fee upon approval.

The central bank also requires pawnshops to submit a capital build upprogram should a crime result in deficiency in its minimum capital orprudential capital.

Pawnshops with assets of at least P50 million are required also to submit acopy of their audited financial statements duly received by the Bureau ofInternal Revenue (BIR) to the BSP not later than June 30 of each year.

Pawnshop owner posts P300k bail on P22M tax evasion case

MANILA, PhilippinesPawnshop owner William Villarica has posted aP300,000 bail to evade prison after the justice department charged himwith a multimillion-peso tax evasion case.

In a statement Saturday, the Bureau of Internal Revenue, which filed thecase against Villarica, said it learned about Villaricas posting of bail a few

days after the Department of Justice found probable cause in the taxevasion complaint against Villarica.

The justice department said it filed a formal case against Villarica with theCourt of Tax Appeals after finding probable cause in the tax evasion chargeby the BIR.

Citing documents from the tax court, the BIR said Villarica posted a total ofP300,000 worth of bail. The bail has allowed Villarica to keep himself fromgetting jailed while the case is being heard in court.

Villarica, sole proprietor of the W Villarica pawnshop, is charged with aP22.4-million tax evasion case for allegedly failing to pay taxes in 2007


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even if he was able to buy a Lamborghini luxury sports car worth P26million.

Of the P22.4-million cost of the tax evasion case, P16.2 million covers thetax on luxury items as well as accumulated interests, while P6.2 million isthe cost of the value added tax.

It took the justice department about one year to file a case against Villaricabefore the CTA. The BIR filed its complaint against Villarica before the

justice department in July 2010.

The case against Villarica is the first Run after Tax Evaders (RATE) case

filed by the BIR under the Aquino administration.

Under the RATE program, the BIR intends to file taxes against high-profileindividuals or entities to discourage the public from evading taxes or payinginaccurate amounts of taxes.

The program is aimed at boosting tax collection by the BIR upon PresidentAquinos directive for the government not to impose new taxes.

Under the Presidents directive, tax collection should increaseby improvingtax administration, particularly tighter audit of taxpayers.

Related STUDIES

Foreign Studies

DEVELOPMENT OF ISLAMIC PAWN-BROKINGSERVICES:DIFFERENTIATING PROFILES OF THEIR RESPECTIVEPATRONS

Abstract

Traditionally, pawnshops in Malaysia had played the role of poor-mansbank by providing procedurally non-cumbersome loans against themortgage of jewellery and other such small items of value. Though theoppressive elements of the conventional pawnshops may have been muchreduced by the provisions of the Pawnbrokers Act 1972, the practices arestill inconsistent with the tenets of Sharia. This led, initially, to theemergence of the first Islamic pawnshop in 1991. Subsequent development


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led to the institutionalization of Islamic pawn-broking, initially on a localizedbasis in the Islamic dominant states, and currently on a national basis.

SUMMARY AND CONCLUSION

Generally, the Islamicized Conventional Pawnshops continued to attractthe relatively low-income stratum of the society which they had beenserving in their pre-Islamicised form. Besides, they appealed more to thefemales than they do to the males. In term of age, their customers aregenerally in the early 40s.

In contrast, the institutional Ar-rahn is seen to be carving a market amongthe relatively higher income groups compared to the IslamicisedConventional Pawnshops. It is also seen to be gender neutralappealing

equally well to the males as well as the females. Besides, age-wise theyseem to be attracting a relatively younger segment of the society.

The study offers results that could possibly be used advantageously by thetwo groups of Ar-rahn service providers. Besides the demographicvariables that are conventionally used in market segmentation. The studyalso offers some lifestyle dimensions that could enrich the development ofmarketing efforts of the relevant service providers. In view ofthe outdoor

nature of the customers that had found an appeal to their services, the

institutional Ar-rahn service providers, for example, could possibly use theoutdoor advertisements. Besides, they could also appeal to the print mediain view of the inclination to read among their customers. The findings

could also be of help in developing advertising copy. To reach theircustomers, the institutional Ar-rahn could possibly employ an outdoor socialsetting among a relatively younger group of some economic means. Theconverse would be true for the Islamicised Conventional Pawnshops.

Given the more open nature of the institutional customers and the more

potent communication tools that they are capable of being exposed to, thepatronage of institutional Ar-rahn is expected to expand in tandem with theexpansion of the network of facilities that is occurring in the country.

When gifts become commodities:

pawnshops, valuables and shame in Tonga and the Tongan diaspora


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Abstract

Far from being displaced by modernity, the exchange of womens textile

valuables of little practical value but enormous ritual significance isincreasing in importance in Tonga and amongst Tongan migrants in theindustrial West. The dwindling production and heightened demand of thesetextile valuables have prompted entrepreneurs to open pawnshops, wherecustomers who are monetarily poor mortgage valuables and customerslacking in exchange networks buy unclaimed valuables. Pawnshopsconvert valuables into commodities and transform the social relationsamong those involved. However, the one emotion that underlies traditionalexchange, shame, remains central to the transactions, albeit in unevenlydistributed fashion. The transformation of textiles from gift to commodity

displays both rupture and continuity with pre-modern forms of exchange,continuity operating at the level of emotional subjectivities. Our analysisforegrounds objects on the one hand and emotions on the other as shapingthe course of cultural and social history.

Modernity,

Conclusion

By providing a modern mechanism in which Tongans can realize the value

embodied in traditional valuables without necessarily alienating them forgood, pawnshops enable individuals to ne gotiate their own positionalitybetween family-oriented exchange-based traditional Tonganness and theneeds of the individual in a capitalist and diasporic modernity. We foundboth old dynamics and new ones at play in pawning for all invcustomerswho pawn, customers who buy, and entrepreneurs. Continuitycharacterizes emotional experience of exchange, with shame figuringprominently in all aspects of pawning, in the same way that it is thedominant emotion in ritualized exchange. Whetheentrepreneurs or

consumers, sellers or givers, men or women, homeland- or diaspora-based, tenaciously traditional or adventurously modern, Tongans aresubject to the abiding relevance of m as an emotion. How they negotiatetheir own shame vis--vis the shame oothers will continue to play a role inhow they incorporate money into their systems of traditional exchange andhow their valuables continue to be markers of identity. Ruptuare found in


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the social relations between transactors, and in the uneven distribution ofshame (or perhaps of the fear of shame) among the participants. Bothrupture and continuity characterize patterns of social inequality: the pre-existing uneven distribution of wealth makes pawning possible, but

pawning aggravates this uneven distribution. Pawnshop owners place inthe moral order and the exchange system illustrates multiple andcontradictory opinions about what it means to be a cultural insider inmodern ongan society. Furthermore, the identity markers of pawnshopcustomers the average ongans are also in flux. Tongan identities arenot fixed, and when Tongans ask one t people they gossip about, What

denomination does s/he belong to? they are emonstrating how aware theyare of the importance of church affiliation as a concentrated index ofpeoples position in the system, in its past as well as its future. Church

affiliation Tonga tells you whether the person is likely to be burdened byobligation but also stautraditional, or at the forefront of modernity but flirtingdangerously with the margin. It alsotells you about the persons emotions,

rank, aspirations, and body habitus (cf. WatsGegeo and Gegeo 1991).

While agreeing with characterizations of modernity as diffuse, shifting, andungrounded (Englund and Leach 2000), we continue to give it a central rolein our annot least because, whatever modernity is, it is the object of somuch desire and the cause so much anxiety for our informants (cf. Osella &

Osella 2006:570). We have argued hea nuanced approach to subjectivitiesof modernity, to which members of society bring different emotions,different intensities of emotions, as well as different material strategies vis--vis objects and money. And it is in the crevices between these differentsubjectivthat we should seek an understanding of what changes and whatstays the same.

Payday Loans versus Pawnshops: The Effects of Loan Fee Limits on

Household Use

Abstract

This paper uses data from the January 2009 Unbanked/Under bankedSupplement to the Current Population Survey File to examine howhousehold use of payday loans and pawnshops as reported in thesupplement in related to limits on loan fees set by some states. We use


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information in the basic CPS to measure household demand as related tothe economic and demographic characteristics of households and use thisinformation to construct demand-adjusted

measures of payday loan and pawn shop use in geographic areas wherestates laws permit payday loan stores to operate. We examine howdemand-adjusted payday loan and pawnshop use is related to effective feeceilings on these products. We find little relationship between levels of feeceilings in their current range and adjusted payday loan usage. Results for

pawnshop indicate somewhat more variation in demand-adjusted usageover the current range of pawnshop fee ceilings. The results are generallyconsistent with conjectures that payday stores can adjust their scale ofoperations to maintain profit margins and thus can continue to lend. As

such, the finding suggest that lowering loan fee ceilings up to some pointcan benefit borrowers; many of whom report using these loan to meet basicliving expense or to make up for lost income.

Getting the Domestic Financial Architecture Right

Abstract

The Asian Crisis of 1997-98 highlights the importance of the financialsector to development. The loss of wealth and income that followed in itswake underscored the nexus between robust financial systems and thereduction in poverty that is expected to accompany economic growth anddevelopment. That crisis, which capped those of the past two decades byits widespread domestic and international contagion, catapulted thearchitecture of the international financial system, and by implication that ofthe domestic system, to a position of prominence on the agenda ofinternational economic issues. It also demonstrated flaws in the Shaw-McKinnon1 thesis of financial liberalisation that

was incorporated into the Washington consensus and that wasaccompanied by financial sector crises in developing countries during thedecade of the 1980s and 1990s. The attention given to the financialarchitecture is intended to make the system


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more robust and less prone to crisis and to ensure that financialintermediation supports steady growth and development. The initialconcern with financial architecture has been

with the international financial system but since the international systemincludes a linked network of domestic financial systems, it was inevitablethat the architecture of

domestic financial systems would also come under scrutiny.

This paper examines the reforms of the domestic financial system indeveloping countries. It makes the case that developing countries mustcontinue to strengthen their prudential regulation and supervision of thefinancial system or face endemic crises that will wipe out the gains in

poverty reduction. The paper is divided into four sections; the

first examines the relation between the development of the financial sectorand economic growth and the second reviews the structure of the financialsystems in developing countries; section three reviews prudentialregulation in developing countries and section four sets out what must bedone to make the system work as intended.

Summary

Developing countries can benefit from the positive relationship betweenfinancial sector development and economic growth but to do so they mustmodernise and reform the financial sector and markets. While the firststeps in financial sector reform concentrated on the creation of new andspecialised institutions, endemic crises in the decade of the 1980s and1990s culminating in the Asian Crisis of 1997-98 also

highlighted the importance of prudential regulation and supervision. Eventhough the importance of regulation and supervision to the orderly

development of markets and institutions is clear developing countries havecontinued to experience setbacks in the implementation. To makeprudential supervision and regulation work better developing countriesshould not neglect the importance of sequencing financial sectorliberalisation and prudential regulation. They should err on the side ofhigher capital requirements that set out in the


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Basle Core Principles impose tighter lending limits and financial restraints,have well defined intervention rules that limit forbearance and reducepolitical pressure on

Regulators and, above all, they should invest heavily in the training of staffneeded to manage and regulate the financial system.

The U.S. Check Cashing, Money Transfer, Pawnshops and Payday LoanServices Industry

MarketData Enterprises, Inc. in June, 2008.

Abstract

This updated analysis by Marketdata examines the controversial butgrowing "alternative financial services" sector - a $27 billion businesscomprised of loosely regulated check cashing, payday loan, money transferand payday loan services. These outlets serve 35% of the U.S. population.Many companies are happy to accept the business of consumers withspotty credit records who have been rejected by banks--the 12 million"unbanked" households that choose not to use traditional banks.

Explosive growth had taken place in the payday loan business, but theyhave come under heavy scrutiny. Critics say these services gouge

consumers with high fees and interest rates, but they do provide moreconvenient hours, less red tape, easier credit, and most customers don' tseem to complain. There are 13,000 check cashing outlets, 11,000 pawnshops, 25,000 payday loan stores and 467,000+ money transfer agentscompeting for this business today. Many outlets/services overlap-providingmultiple services at the same site. The study explores why growth at checkcashers and pawn shops is meager, and the effects of the economicslowdown.

This new study by Marketdata examines the nature of the business,reasons for the growth of non-bank services, immigration trends, nationalreceipts/growth from 1999-2007, 2008 to 2013 forecasts, average storerevenues, customer demographics, key industry trends, federal/stateindustry regulation/fee caps, self-service check cashing machines, profitmargins, franchising, gold prices, global remittance trends, consumer debt


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levels, reasons for the industry' s past negative image, and more. Findingsof research studies by: Fannie Mae, Georgetown University, FISCA,Federal Reserve Board, brokerage analysts, Natl. Check Casher' s Assn.,The World Bank, INS, Natl. Pawnbroker' s Assn., U.S. Census Bureau,

FDIC, and more.

This study is believed to be one of the few in-depth publicly availablebusiness analyses that exists of this market. 13 in-depth company profiles(with 2005-2007 financials) are provided for: ACE Cash Express, CheckInto Cash, Dollar Financial, Western Union, Moneygram, Ria Financial,Cash America, EZCORP, First Cash Financial, Advance America, CheckInto Cash, CNG Financial, and QC Holdings.

THE OPTIMIZING OF RAHN SERVICE FOR THE

DEVELOPMENT OF ISLAMIC BANKING IN INDONESIA

Abstract

This paper considers rahn in classical fiqh with various opinions fromIslamic schools of jurisprudence (madzhab). Here, one issue becomingdebate among Moslem scholars is the use of mortgaged objects. Rahn isadopted by Islamic banking and becomes one of its services offered to themarket. In practice, rahn appears as two different products. First, as acomplementary product, that is additional transaction (guarantee/collateral)for other products such as bai al-murabahah financing. In this case, Islamicbanks can detain debtors mortgaged objects because of transaction.

Second, as an independent product. In some Moslem countries includingMalaysia, rahn has been being used as an alternative for

the conventional pawnshop. Differing from that in conventional, in rahndebtors are not charged with interest. Instead, they are obliged to payentrustment cost, conservancy cost, and custody cost, as well as appraisal

cost. The main difference between such rahn costs and interest is, whereasinterest can accumulate, costs of rahn can be paid once and specified

in advance. People interest toward conventional pawn service is exactlyhigh because they had to get cash. This can be seen from the increase ofpawnshop turnover from year to year. Rahn


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Service is thus potential to be implemented and maximized. Logically,charged with high interest people still considering pawnshop as benefactor,much less Islamic banking with

Rahn service charging no interest. Hence, we are natural to optimisticallyintroduce rahn service. Of course with manners and regulations that arefree from the elements of riba.

Local Study

A brief overview of the role of pawnshops in the Philippines

Our parents used to tell us: the moment you start earning, buy somejewelry and other properties. You can pawn them whenever you encounter

financial difficulties. (Mario Lamberte1988).

Pawnshops offer financial services known as microlending which is animportant source of credit in many developing countries, especially in Asia.Pawnshops fill a void left by the banking system. They provide poor andlow-income households with credit that would have not otherwise havebeen available and increase competition in the credit markets by providingan alternative source of credit for those who are frozen out of loans frombanks. This has served as a financial safety net for the poor and low-income households.

Pawnshops can provide these financial services to poor and low-incomehouseholds for a variety of reasons. One is that pawnshops fall under lessregulation than other financial institutions.

Pawnshops used to operate like a sari-sari store with very little governmentcontrol. In fact the only time these units came into contact with governmentagencies was when they paid business registration fees and income taxes.They were not even covered by the usury law enacted in 1916. (Mario

Lamberte1988).

Beginning in 1972, The Bangko Sentral ng Pilipinas (BSP), known as the

Central Bank in 1973.was given the authority and responsibility to regulatepawnshops. Presidential Decree 114 (29 January 1973) and the CentralBank Circular No. 374 (13 July 1973) set out specific regulations coveringthe operations of pawnshops.


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Pawnshops are still among the least regulated businesses that fall underthe authority the BSP. Under the BSPs regulations pawnshops are

authorized to lend, but cannot accept deposits and are required to submitregular financial reports. The BSP has financial audit authority over

pawnshops and can inspect book records and general business practices.It also has the authority to sanction a pawnshop.

Although in 2009, the BSP did issue a new, more stringent, set of rules thatwill govern all pawnshops operating throughout the country. The new ruleswill replace the existing implementing rules and regulations of PresidentialDecree No. 114 also known as the Pawnshop Regulation Act issued in1973.

The new rules are designed to enhance consumer protection and foster

confidence in the pawnshop industry by the pawning public. For instance,proprietors, partners, incorporators, directors, stockholders and officers ofpawnshops must meet certain fit and proper standards to ensure thatpawnshops are owned and run by people without any derogatory recordand to promote good governance. Pawnshops are now required tomaintain a minimum level of capital or net worth in relation to their loanportfolio as the existing statutory capital of P100,000 has become too smalland it is susceptible to the proliferation of fly-by-night operators.

Another reason pawnshops can provide these financial services to poorand low-income households is that their loans are backed by hard assetswhich lowers the transaction cost to the borrower and the lender andeliminates the need to analyze the borrowers creditworthiness.

Over time the pawn item has changed. In the past, for example, MarioLamberte noted (1988) that pawnshops have preferred lees bulky itemshigh-value items like jewelry. With the advent of more competitionpawnshops have broadened the type of items they accept as collateral.

This change continues today with the acceptance of computers, cellphones and other electronic devices as collateral.

Because of the efficiency of pawnshop operations, they have been shownto be a profitable business. A study for the Philippine Institute forDevelopment indicates that efficient management of pawnshops allows


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25% of the gross operating income to flow to the bottom line as net profits(Lamberte, 1988).

The pawnshop industry in the Philippines has seen spectacular growth.This growth has largely been attributable to (1) the role that pawnshopsserve in filling a demand that is not being filled by the more traditionalbanking system: It gets credit to those who dont have access to traditional

bank loans and (2) pawnshops operate with large profit margins. This hasnot gone unnoticed by small entrepreneurs and job seekers in thePhilippines as they have flocked to the pawnshop industry.

Mobile payments in the Philippines: Future Opportunities for Growth

We often hear that M-PESA was able to scale quickly because it targeted

an unmet need: urban to rural remittances. Safaricom based the initiallaunch of the M-PESA service on the send money homepropositionbecause a large proportion of split families in Kenya needed a way to sendmoney to relatives in rural areas but had few ideal options to do so.

In many markets, however, such a clear unmet need does not exist.

The Philippines is a prime example of this. Even though mobilemoney providers have been in the market for over ten years, they havestruggled to gain market share in the face of well known and wellestablished payment providers. Knowledge and usage of mobile moneyservices are low with less than 4% of users of all payment service providersreporting usage of mobile money services and awareness of four mobilemoney products ranging between 28% and 46%, even though more than70% of users have access to a cell phone

Our study focuses on the demand side of domestic payment services: billpayments and money transfers

In 2010, the Bill & Melinda Gates Foundation launched a study withBankable Frontier Associates to understand the demand for domesticpayment services in the Philippines and to identify potential opportunitiesand unmet needs for mobile money providers to target. The study foundthe Philippines is an active and mature payment market, with a myriad ofpayment providers, including payment centers, banks and pawn shops to


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choose from. Only 28% of respondents reporting they make no paymentsand most Filipinos are aware of and using multiple service providers.

In our study, we focused on three primary types of domestic remotetransactions mobile money has the potential to target: bill payment, moneytransfers, and loan payments. Bill payments are most common and areused by 55% of the population. They are followed by transfers (used by33% of the population), and loan payments (used by 16% of thepopulation). We did not explore access to financial services, although 29%of respondents claim to be saving at home or in banks, or other potentialdrivers of mobile money that have had success in other countries, such aspublic transportation and online purchases.

In this paper we use the results from the study to explore five alternative

and almost equally used channels for bill payments or moneytransfers. Pawnshops are the preferred channel for money transfers, with29% of Filipinos citing the leading pawnshops (M Lhuillier and LBC) as themain payment service provider in the last twelve months. Paymentcenters are used to pay bills by 21% of Filipinos while bank transfers arethe prefer method for 17% of Filipinos for both money transfers and billpayment. Informal transfer options are the primary method for moneytransfers and bill payment for 15% of Filipinos. Alternatively, 13% ofFilipinos pay their bills directly or are direct payers.

Existing payment channels are good but far from perfect

In order for mobile money to take off in competitive markets like thePhilippines, providers will not only need to identify a high potential targetopportunity, but also ensure their ability to effectively serve the marketsneeds relative to the competition. We have identified user pain points inthe following areas when paying a bill or conducting a money transfer:speed of delivery, trust and reliability, price, and customer service.

Consumers in the Philippines have access to a number of channels thatmay provide either speed, trust or good customer service but none of themis ideal, leaving room for a service that gives customers more of what theyvalue.

For bill payments, customers can pay in a bank or payment center. Bothoptions have their short comings: although banks are trusted (especially


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with large amounts), they suffer from long queues, unfriendly and limitedstaff. Payment centers are cheap and closer to home than a billers office,but also suffer from long queues and delays to credit customer payments atthe biller. In addition, neither banks nor payment centers are widely

accessible, especially in rural areas. In fact, 32% of users reported theywould be willing to pay PhP 50 (US$1.50) for bill payment services that donot require them to leave their home.

For money transfers, customers have the option of using banks, big brandmoney transfer services, pawnshops or informal channels. Pawnshops arethe most popular given their ubiquity, trusted brand and speed (if picked upat the pawnshop) but the most popular pawnshops, M Lhuillier andCebuana, are not completely customer friendly. M Lhuillier has long

queues, strict verification and unsafe locations and Cebuana has highfees. The larger transfer companies like Western Union and LBC havehigh attrition rates due to high fees and other problems. LBC, for example,offers door-to-door service, but it can be slow and their customers complainthat their neighbors know when money is delivered. Consumers alsocomplain about the stigma of entering pawnshops. Banks offer security,privacy and trust for larger transfers, but are not always accessible.

Although alternative channels are not perfect, mobile payment providersfind it difficult to convince consumers to try a mobile payment service asevidenced by low usage figures (4%) compared to other payment options.

According to our study, users of one type of payment providers tend to besticky. Our survey conducted among users of payment services found thatfewer than 10% of one-time users have stopped using a service. They alsotend to think their payment service is the best, providing high scores ontrust, convenience, speed, security, fees and customer service. Users saythey would utilize a new payment service in addition to their current service,rather than in lieu of it.

Some segments are still not served by formal providers

Mobile payment providers also have an opportunity to target marketsegments not served by formal providers such as personal direct payersand users of informal service providers.


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33% of the population still pays for their bills and loans directly at the billers

office, and do not use other intermediaries such as banks or paymentcenters. The vast majority of personal direct payers (75%) indicate thatthey trust only themselves to deliver payments, although 57% agreed that

paying bills would be easier to do via a third party. Perhaps by tackling theissue of trust, mobile money operators can convince these potentialcustomers, who tend to be male, to try their services for the conveniencethey can offer.

Users of informal service providers may also be a potential market niche.25% of all users use informal service providers on a regular basis forsmaller, regular transactions. These users tend to be rural and poorwomen who generally make bill and loan payments intra-island. In fact,

these users in rural areas rarely pay bills or loans through formal serviceproviders, and when they do, they use the leading pawnshop. Althoughinformal options are low cost, they suffer from delays, the sender has noautomated confirmation of when the money arrives, funds can be stolen,and unanticipated costs may arise (such as tips or paying for food or petrolof the deliverer). Similar to a country that does not have many formalpayment options, such as Kenya pre-MPESA, providing an alternative tothe existing options can meet a need that resonate strongly.

Lower value transfers are an untapped opportunity

Mobile payment providers may also have an opportunity to facilitate lowervalue transfers between family and friends that occur informally and thathigher cost channels (including pawnshops) cannot profitably serve. Ourstudy found that 52% of Filipinos receive money from friends and family(either as a loan or a remittance) in the event that they need to make apurchase or pay a bill but do not have enough money. The rest seekmoney from alternative sources: 15% will do something to earn the moneythemselves, 12% will wait for their salary and 10% will go to an ATM to

withdraw cash. Filipinos also regularly send or receive money, foremergencies, daily household expenses, education, bill payment, orbusiness expenses. Sweeping these low value transactions throughmobile money services would mean a significant increase in their volume oftransactions as well as customers. In addition, 33% of all users said if they


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could make cross payments between mobile money schemes, then theymight find this persuasive enough to try them.

Next steps for mobile money providers

During the last ten years, mobile money providers in the Philippines havestruggled to gain traction in the market. They compete against an activepayment market with numerous strong alternative channels for billpayments and money transfers. However, these alternatives are far fromideal, according to customers themselves, and niches exist in the paymentsmarket that have not been targeted.

Mobile money providers have an opportunity to attract customers awayfrom existing payment options, persuade customers to use their services in

addition to their current payment provider or to target segments that are notcurrently served by formal payment providers, such as personal directpayers and users of informal service providers. In addition, they may havean opportunity to capture lower value transfers.. The challenge faced bymobile money will be to encourage customers to try their service and toconvince them through early trials of the superior value of the service. Theextent to which they will succeed in doing so will depend on the investmentmobile operators are willing to make in strategic marketing, getting their feestructures right and creative partnerships with banks and others that may

add value to the customer experience.

STUDY OF PAWNSHOPS IN CUBAO, Q.C

SUMMARY OF FINDINGS

The researcher presents the findings based from the analysis andinterpretation responses on the questionnaire gathered from the (9)pawnshops under study.

PROFILE

1.1 YEARS OF EXISTENCE

Based on the collected several pawnshops have a continuing operation forso many years despite of the unstable economic and political condition ofthe country.


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Four of the respondent pawnshops have existed for more than sixteenyears. While others have been in business for 6-15 years, only onepawnshop has been operating within five years. This is the newlyestablished pawnshop.

1.2 ORGANIZATIONAL STRUCTURE

All of the pawnshops are registered with the Securities and ExchangeCommission (sec) and regulated by Central Bank of the Philippines (CB)pursuant to PD NO. 114- regulating the establishment and operation ofpawnshops.

These pawnshops are issued by these governing agencies circularsquarterly, representing 56 percent of the total population.

Findings of the study revealed that the nine pawnshops or majority of themwere organized as corporation as supported by information gathered fromthe Securities and Exchange Commission (SEC).

1.3 CAPITALIZATION

Majority of the respondents were initially capitalized at P100, 000 but lessthan P200, 000 in compliance with PD NO. 114 wherein the minimumcapital is P100 000.

As gathered from the data collected about 20 percent of the present capitalis borrowed. However, as the volume of loan increase, likewise increasetheir capital through borrowings. With the present economic condition, thebigger the capital, the better chances the industry to survive whereincompetition with other pawnshops in terms of interest rate, mode ofinterest, collection and appraisal comes in.

The cash loan out is at par with the cash collection of the respondent

pawnshops.

1.4 PROFITABILITY, STABILITY AND LIQUIDITY

Majority of the respondent pawnshops show a favorable profitability ,stability and liquidity position as expressed in terms of net income to totalassets ratio, debt-to-equity ratio and current assets ratio.


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2. OPERATIONS OF THE BUSINESS

The operation of pawnshops is based on the guidelines and rulings of thecentral bank of the phil. Under PD NO. 114- Regulating the establishmentand operation of pawnshops.

They are also registered with the Securities and Exchange Commission forcorporation and Department of Trade and Industry for single proprietorship.Likewise, taxes paid to the Bureau of Internal Revenue.

3. PROBLEMS ENCOUNTERED BY PAWNSHOPS

Based from the findings of the study the common problems encountered bythe pawnshops are acceptance of plated or fake articles, over appraisal of

items pawned, individual letters sent to pawners for maturing loans are notreceived on time and strict compliance of central banks reportorial req.

4. CONTRIBUTION OF PAWNSHOP TO THE ECONOMY OF THECOUNTRY

Pawnshops play a vital role in the economy of the country. They contributetremendously to the socio-economic needs of the people by providingimmediate loan. These loans are obtained at the easiest way and at lowerinterest rate that no other finance institution can offer.

5. FUTURE OF THE INDUSTRY

The respondents perception as to the future of the industry is very good.They are very optimistic in their perception and feel that it will continue togrow and develop.

CONCLUSION:

1. Based on the findings of this study, the researcher forwards the following

conclusion:

1.1 Years of existence

Several pawnshops have already existed for so many years despite theodds. Only one pawnshop has been in operation within 5 years . This goes


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to show that the pawnshop business is a profitable one, hence they hadgone so far in the industry.

1.2 Organizational Structure

The respondent pawnshops are family corporations registered with theSecurities and Exchange Commission. Therefore, the management of thebusiness is handled by the members of the family and all profits dividedbetween the capital partners.

1.3 Capitalization

About 20 percent of the present capital of the pawnshops is borrowed frombanks.

Majority of the respondents were initially capitalized at P100,000 but lessthan P200,000 in compliance with PD NO. 114- Regulating theestablishment (.) and operation of pawnshops wherein the minimumcapital is P100, 000.

1.4 Profitability, Stability and Liquidity

The profitability, stability and liquidity of pawnshops casured by the relevantration indicate a favorable position. This resulted to the expansion of

pawnshops and continued existence through the years.

2. Operations of the business

The establishments of pawnshops are governed by the central bank of thephil. (CB) pursuant to PD no. 114-Regulating the Establishment andOperation of Pawnshops. Likewise, they are also registered with theSecurities and Exchange Commission for corporations and with theDepartment of Trade and Industry (DTI) for single proprietorship.

3. Problems Encountered by Pawnshops

Several problems encountered by pawnshops poses as a hindrance for itsgrowth and development in the country.

4. Contribution of Pawnshop to the Economy the Country


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Pawnshops have given considerable contribution to the economy of thecountry. It has a well-defined role in the community and it is the only non-bank finance institution that provides instant credit to everyone whichcannot be obtained by him from any other source with the same ease that

pawnbrokers require of the people.

The taxes paid yearly generate revenues to the government, thuscontributing to the recovery of the economy of our country.

5. Future of the Industry

The future of the industry as perceived by the respondents is very goodand promising despite of the economic situation of the country. Due to thehigh demand of the services and loan that a pawnshop can offer, the

researcher is very optimistic that it will continue to grow through the years.

RECOMMENDATION

In the light of the foregoing conclusion, the following recommendations areforwarded by the researcher:

1. The minimum capital requirement of the pawnshop industry be increasedfrom 100,000 to 300,000 for the business to operate profitably andcompetitively with other pawnshop and finance intermediaries.

2. Pawnshops should be organized on a more scientific basis ofmanagement to be able to give the maximum help to the community.

a. Seminars for those interested to venture into a business.

b. Publications of newsletters for the members of the PawnbrokersAssociation to give information about the trend in the business.

3. The pawnbrokers should endeavor to acquire modern tools or equipment

that will aid the appraisers in detecting the genuiness of gems pawned toprotect them from being victims of fraudulent pawn.

4. With the intricacies pointed out in connection with the seemingly simplebusiness, the pawnshop owners should have a sound knowledge of the keyfunctions of the business, ike bookkeeping and safe keeping.


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5. For the future investor he should be prepared to invest more than therequired minimum capital prescribed for more profit, better chance ofsurvival and to operate competitively with other pawnbrokers.

More pawnshops to be established would create employment opportunitiesfor the unemployed and additional revenues to the government.

PROFITABILITY OF SELECTED PAWNSHOPS IN COTOBATO CITY

SUMMARY

The findings of the study are summarized as follows:

1. Most of the establishments have been in the pawnshop business for atleast seven years and are formed as sole proprietorship. Three of therespondents have branches in the city. Two of which have been in thepawnshop business for a long time while one establishment opened otherbranches even though it is new in the business. Two establishments havethree branches in other areas.

2. The most common amount for initial capitalization is in the range ofP300,001 to P500,000. The money came from the owners own pocketsand from borrowings.

3. The maximum number of employees hired per pawnshop establishmentaveraged three to four. Hence, multi-tasking is employed in theestablishments as the employees handle numerous tasks. A significantnumber of employees have been with the establishment since its inception.Therefore, employee turnover rate is quite low.

4. All of the respondents believed in training their appraiser but the kind oftraining varies since some of the owners send their appraisers to formaltraining by attending seminars while others choose in house training.

5. Half of the respondents are located in commercial sites in Cotobato city.The main reason of pawnbrokers for choosing the location of theirestablishmentis its accessibility. Four out of six respondents are located inthe same street.


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6. The most common type of collateral accepted is jewelry. Market value,appearance and ksrat are the three most common criteria in jewelryvaluation. Competition greatly affects the valuation of collateral.

7. At present, the prevailing interest rate is between five to six percent permonth. It is during the month of June when people need money the mostwhile pawners tends to redeem their pawned items during the month ofDecember. Since pawners are required to pay interest on a monthly basis.Renewal process does not have peak months. Auctions are usuallyscheduled during December since employees are receiving their bonusesand thus, have extra money. The average loan amount per transaction inthe cotobato area is P500 and below. When asked about the averagenumber of daily transactions most of them choose up to 25 range whether it

is peak or off-peak season. Majority of the respondents has an averagepercentage of pawned items redeemed, renewed and auctioned betweenthe range of 26 to 50 percent for each process.

8. Pawnbrokers usually schedule their auction three to four times in a yearand they sell the items either in wholesale or retail. Auction is believed togenerate mor profit than the other three processes.

9. The ability of the company to generate profit based on sales is toppedestablishment E, while establishment A ranked first in its ability to generate

the adequate return on equity an assets. On the aggregate, the averageROS, ROE and ROA of selected pawnshops were catching up with theindustry averages for the same period per BSP records.

10. There is a significant relationship between capital structure andprofitability particularly on return on sales. ROE and ROA did not showsignificant relationship with capital structure.

CONCLUSIONS:

Pawnbroking is still a lucrative business to engage in, despite all thechallenges faced by the pawnshop owners but effective management isneeded to ensure the business remains profitable in the future. Hence, theassumption is correct that pawnshop business is profitable.


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The highest percentage of pawnshop profitability comes from the auctionprocess. Therefore, the assumption that pawnshops make more moneyfrom the interest earned in lending, redemption and renewal incorrect.

There is a significant relationship between capital structure and profitabilityparticularly on return on sales, hence the hypothesis that there is nosignificant relationship between capital structure and profitability.

Recommendations:

1. Pawnbroker must see to it that they have a steady flow of capital in apawnshop business since pawnbroking is seasonal as evidencedby thepeak months in lending and in redemption.

2. Anyone who wants to open a pawnshop or a new branch must makesure that the location is accessible and in a commercial area where peoplefrequent. Pawnbrokers must find location that are not yet saturated bycompetitors.

3. Pawnbrokers must continually educate themselves about the newtechniques or tools in appraisal by attending seminars in jewelry evaluation.This will minimize errors in acceptance of dake jewelries.

4. Pawnbrokers must find areas in their operation where they can reduce

costs and expenses in order to increase their profit. This will result in higherROS, ROE and ROA.

5. Pawnbrokers must improve their equity and asset utilization in order tohave better ROE and ROA.

6. Offer excellent service to customers by understanding the culture andtraditions of the Mslims. Thus, gaining competitive advantage over thecompetitors.

7. The law-making bodies mustincrease the amount of initial capitalizationof the pawnshop establishment since higher profitability. Bangko Sentral ngPilipinas, must require appraisers to undergo a licensure examination toensure that they are qualified to work as such. They also need to review orrevise any regulations that does not anymore answer the need of thepawnbrokers and the pawners.


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Electronic Banking: Delivering Microfinance Services to the Poor in thePhilippines

Abstract

Microfinance has proven to financial institutions (i.e. banks) that theservices they provide to their traditional clients can also be offered to poor

and low-income entrepreneurs and clients, in a sustainable and viablemanner. These institutions have seen that reaching out to the majority ofthe countrys population, which is the low-income market, does notnecessarily mean a losing proposition for their institutions.

Similarly, it is only appropriate that the more efficient and cheaper methodsof providing these financial services, such as electronic banking services,

which are offered to valued traditional bank clients, should also be offeredto microfinance clients. The increased convenience and lowered costsarising from innovations in electronic banking should also benefit the poorand low-income clients.

This paper will present a brief overview of the microfinance industry in the

Philippines as well as the recent developments of increasedcommercialization. Commercialization of microfinance has spurred greatercompetition leading to increased innovations in microfinance products and

service delivery.

Two case presentations will be made on existing models in whichtechnological innovations of electronic banking are being used specificallyto serve microfinance clients. First, is the use of mobile telephones throughthe short messaging services (SMS) to pay for microfinance loanamortizations using electronic cash platforms. The other case is a briefexample of the distribution of Automated Teller Machine (ATM) cards tomicrofinance clients, which aims to lower costs for the microfinance

institution while increasing convenience for the clients.These two examples will include the discussions on enabling factors,barriers and obstacles. A closer look at the implication for regulationparticularly by the Bangko Sentral ng Pilipinas will be undertaken. Thedirection of policy, existing relevant regulations and rules will likewise bepresented.


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CHAPTER III

RESEARCH METHODOLOGY

Research Design

The method used in this research study is the descriptive research method.It illustrates characteristics and data about the population particularly thecustomers, managers, and employee of an entity. It also describes thecurrent nature and current event on the business. It is able to discuss theprogress and the accurate data needed to make this research studypossible. This method is also used for frequencies, calculation and othersstatistical figures related on the business.

Furthermore, all the necessary details were gathered through giving awayquestionnaires to the respondents and conducting a survey. Theresearchers provided survey instruments particularly- questionnares tohear what truly exists regarding the business. The data were tabulatedaccording to its group depending on the concerns like the gender, age, thenumber of employees and staffs and customers per day.

The study also includes the research instrument used and procedures ongathering the data. The data gathered were calculated, tabulated, classifiedand defined properly through the use of tables and figures.

Research Locale

Marikina, officially the City of Marikina, known as the Shoe Capital of thePhilippines.

Bayan, Marikina is the town centre of the Marikeos. It is an accessiblelocation in buying commodities for household facilities and other personalneeds. It is also accessible to the people who transact business in many

establishments that are located there.

Respondents of the Study

NAME OF PAWNSHOPS | NO. OF EMPLOYEES | NO. OF CUSTOMERS|

1. Cebuana Pawnshop | 2 | 20 |


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2. 18th Jewelry Pawnshop | 3 | 21 |

3. Capital Pawnshop | 2 | 20 |

4. Mamas Pawnshop | 2 | 20 |

5. Palawan Pawnsh

pawnshops research

Documents