The Philippine pawnbroking industry continues to grow in terms of assets, network, and capitalization as it expands the range of products and services it offers to the public.
“The pawnshop industry’s assets of P96.9 billion as of end-2021 represents a 4.7 percent increase over the previous year’s P92.5 billion,” according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno.
The industry’s network also expanded to 1,156 head offices and 14,350 branches nationwide by end-March 2022, from 1,152 head offices and 14,236 branches three months earlier, as of end-2021.
Pawnshops are present in 1,361 of 1,634 cities and municipalities, or 83.3 percent of all local government units across the country.
“This highlights the pawnshops’ role as major financial service access points for individuals and small businesses,” Diokno said.
Pledge loans, or what we call as “sangla,” rose year-on-year by 2.7 percent to reach 54.5 billon pesos at end-2021.
The industry’s liquidity level is also adequate, as liquid assets account for 22.9 percent of the industry’s total assets.
Pawnshops’ capitalization, meanwhile, grew by 2.6 percent year-on-year reaching P42.2 billion at end-2021. The industry’s capitalization remains adequate to support risk-taking activities.
The rise in pawnshops’ capitalization was primarily driven by capital accumulation from continued profitable operations, with earnings of P3.9 billion in 2021.
The BSP noted that the pawnbroking industry sustained its growth amid continuous diversification, innovation, and digitalization.
Aside from extending loans on pledged assets, pawnshops have diversified their products and services to include activities such as remittances, money changing, bills payment, and cash agency.
Pawnshops, particularly the major players, are now multi-product or multi-service institutions, with group structures and multiple financial service access touchpoints.
“The industry’s multiple financial access points, wide geographical reach, and role of providing accessible loans to households and small entrepreneurs, including the unbanked, all underscore the crucial role of pawnshops in promoting financial inclusion,” explained Governor Diokno.
Items being pawned have also evolved. Besides jewelry pieces, pawnshops now accept high value electronic gadgets, watches, musical instruments and luxury items such as designer bags and accessories.
The inter-operability of branches and digitalization in the industry, primarily the major players, are likewise improving.
For instance, customers may now pawn-renew-redeem from any branch at the customers’ convenience. Online pawning transactions are also gaining traction especially at the height of the pandemic, which limited customers’ mobility.
We have also seen significant transformation from an industry dominated by stand-alone “mom and pop” or ”sari-sari” store-like businesses, into one with more sophisticated group structures.
For example, owners of major pawnshop companies also have money service businesses, jewelry stores, insurance companies and in some cases, banks. This creates an ecosystem that utilizes synergies between and among the entities within the group.
As pawnshops grow the network of their affiliated businesses, they also have more incentive to expand their pawnbroking business.
The growth and transformation of the industry calls for a responsive and holistic policy direction and supervisory approach.
In line with this, the BSP implemented a network-based supervision approach aimed at assessing risks and supervisory concerns at the group level rather than on a per entity or pawnshop basis. This strategy will be continuously strengthened as the industry evolves.
The BSP is also working on initiatives to adopt a reporting governance framework aimed at promoting discipline and deterring reporting violations. This will help promote the safety and soundness of the pawnshop industry, while safeguarding the customers’ interest and the financial system in general.
Also underway are efforts to reinforce the requirement for conducting pawnshop self-assessments, and to further digitalize the processing of licenses and applications. These are aimed at enhancing the efficiency of onboarding new players while ensuring that only qualified industry players are granted a license to operate.
Moreover, money service business or MSB regulations are being enhanced. These have an impact on pawnshops engaged in this business. Said enhancements are aimed at setting clear supervisory expectations and standards for MSB operations.
Meanwhile, the BSP continues to pursue responsive and holistic policy initiatives and supervisory approaches for pawnshops to ensure the safety and soundness of the industry and the financial system in general.
