Starting a Pawnshop Business

There's still much space for expansion in the pawnshop business in the Philippines. Jean Henri D. Lhuillier, of Cebuana Lhuillier Pawnshop Companies, recently mentioned that "there is still room for expansion in the Philippines and the company is in fact growing by an average of 3% to 5% a year." This room for expansion is on top of the enormous growth in this industry. Pawnshops have multiplied in number in recent years and have been posting fast-paced growth in terms of operations and revenues, which gave rise to a proposal to enact a new law regulating pawnshops (the existing law is PD 114). The figures stated in the press release in connection with that bill reveals the following very interesting details: Based on data from the Bangko Sentral ng Pilipinas (BSP), pawnshops provided a total of P10.1 billion worth of loans at the end of 2004 or almost double from the P5.5 billion worth of loans they extended in 1995. As of November last year, according to BSP, there are 11,942 pawnshops operating in the country from only 4,173 pawnshops 10 years ago or in 1995. Furthermore, pawnshops' total assets stood at P14.6 billion at the end of 2004, from only P7.7 billion in 1995. Moreover, pawnshops consolidated capital base considerably increased from P4.2 billion in 1995 to P7.7 billion in 2004. How to register a pawnshop. A sole proprietorship, partnership or corporation may operate a pawnshop. The business entity must first be registered with the DTI (for sole proprietorship) or the SEC (for partnerships and corporations).The certificate of registration and other documents are then submitted to the Bangko Sentral ng Pilipinas (BSP). The filing/processing fee is P1,000. Of course, that does not include the filing fees for the SEC and the Mayor's Office (for the Mayor's Permit or business license). Provide for sufficient time up to the planned opening because papers will shuttle back and forth between the SEC and the BSP. The checklist of requirements on how to start a pawnshop business are posted at the BSP site. Growth of pawnshops reflective of economy? Many, if not most, of us will have financial emergencies that can't be covered by the existing savings. We borrow from relatives and friends, if we're lucky. If not, we borrow from banks and similar financial institutions, but the lag time in processing the loan is foreign to the term "emergency". One of the fastest way to procure money (no, not stealing), is through pawnshops. According to the press release mentioned above: "Pawnshops provide an alternative source of credit for small borrowers left unserved by banking and other financial institutions in the country, especially in cases of emergencies." On the other hand, it could be said that the booming business reflects the current situation where the harsher economic life forces people to "pawn" properties just to have money for basic needs. Pawnshops may be one of those recession-proof businesses, but their proliferation may also be a warning sign of the economy's health.