Why do many go to pawnshops more than banks?


CEBUANA Lhuillier has a branch on Chino Roces Avenue. PHOTO BY EDWIN BELLOSILLO

For many Filipinos, pawning jewelry at a neighborhood pawnshop has been the most common and quickest way to address an urgent need for relatively small amounts of cash.

Compared with banks, pawnshops do not impose as many documentary requirements before releasing cash to customers. Moreover, the latter are more accessible, as they may be found even in remote areas where banks do not operate.

But despite the essential role these financial-service providers play, pawnshops still suffer from a bad reputation of preying on middle- and low-income Filipinos. The perception remains that pawnshops have a tendency to take advantage of people in need of cash through profiteering, and that many of them are fly-by-night operators that steal pawned jewelry.

The Bangko Sentral ng Pilipinas, which has a division dedicated to regulating pawnshops, agrees that the pawnshop industry continues to suffer a stigma. It admits that it receives complaints involving pawnshops from time to time, usually in terms of operators that suddenly disappear without notifying customers about how they could get their pawned assets back.

The BSP, however, says the proportion of erring pawnshops to the total number of industry players is miniscule. Ma. Belinda Caraan, officer-in-charge of the central bank’s integrated supervision department, says the number of pawnshop branches that have been the subject of complaints is equivalent to less than 5 percent of the industry’s network.

The pawnshop industry has a network of nearly 17,000, which include head offices and branches. Of the number, about 10,000 are engaged solely in the pawning business. The rest also operate auxiliary businesses, such as money changing, remittance facilitation, and bills payment facilitation.

MOA with LGUs

“Until now, there is still the negative view that pawnshops prey on consumers. We want to help the industry change its image,” Caraan tells SundayBiz.

To do the task, Caraan says, the BSP is intensifying its coordination with local government units (LGUs) as far as monitoring pawnshops is concerned.

She says that under a recently updated memorandum of agreement (MOA) between the central bank and the Department of the Interior on Local Government (DILG), the two government institutions shall engage in information sharing for the purpose of better regulation of pawnshops.

Caraan says constant enhancement of regulation, with the aim of bringing down the number of erring or fraudulent pawnshops to almost zero, will help improve the public image of the pawnshop industry.

In one of the central bank’s latest initiatives, its representatives, with assistance from LGUs, conducts random visits of pawnshops all over the country. The BSP targets to cover 500 pawnshops until 2015, and an even larger number in the succeeding years.

In the spot visits, Caraan says, BSP representatives check if a pawnshop is duly registered and if it complies with various regulations.

Caraan says most of the pawnshops that have been the subject of complaints are not registered businesses. She advises people planning to pawn a property to first check the website of the BSP to see if the pawnshop to be visited is registered.


The BSP likewise holds training seminars for pawnshop operators and their staff. She says such training is conducted at least once a month by BSP personnel all over the country. The training covers a wide range of topics, including ethical business behaviors, valuation of assets, and detection of money-laundering activities, among others.

Training helps improve the manner of service delivery by pawnshops, Caraan says.

“We like people to develop a positive view of pawnshops. We want the public to perceive pawnshops not only as accessible, but as reliable and trustworthy providers of financial services,” Caraan says.

Service providers

Minda (not her real name), an employee at Palawan Pawnshop in Mandaluyong City, says in a random interview with SundayBiz that pawnshops must be perceived positively given the vital role they play in meeting short-term financial needs of many Filipinos.

“For many Filipinos who are short of cash, pawning is the easiest way to solve their problem. It is much easier to raise money through pawning than securing a bank loan,” she says in Filipino.

She says the pawnshop she works for receives between one and six customers, mostly from the neighborhood, pawning jewelry in a day.

Janet, a mother in her 50s and who has been a pawnshop customer, says pawning has been a reliable means to meet her immediate need for cash.

“For instance, if there is an urgent requirement for house repair and I fall short of cash, all I have to do is visit the nearest pawnshop,” Janet says. “It is not advisable to go to a bank and try meeting all its requirements if what you need is just a small amount of money,” she adds.

Expanded role

Because of their wide reach, pawnshops are identified by the BSP as entities for “financial inclusion.” The term refers to the act of making various financial services (such as payment facilitation, remittance facilitation, money changing, micro loans, and micro insurance) accessible even to people in far-flung areas.

A study by the BSP released earlier this year said only two out of 10 Filipinos have bank accounts. The BSP said the information is an indication that banking services are still mostly concentrated in urban areas and are not reaching most Filipinos in rural communities.

Caraan says, however, that pawnshops are capable of filling the gap.

Unlike a bank, a pawnshop is much easier to put up. This is the reason they are much bigger in number compared with banks. While there are nearly 17,000 pawnshop head offices and branches in the country, there are only about 9,000 bank head offices and branches.

The wider reach of pawnshops is largely credited to the ease in putting them up. Compared with a bank, a pawnshop requires less space, less staff, and needs much less capital (each pawnshop branch is required by the BSP to have a capitalization of just P100,000), according to Caraan.

“There is a push for financial inclusion, and pawnshops are seen to help achieve the goal of having more Filipinos access financial services,” Caraan says.

Some of the auxiliary services that many pawnshops now offer include remittances facilitation, money changing, and bills payment facilitation. Moreover, a few also now serve as “cash in-cash out centers” and offer mobile banking services.

Under the mobile banking concept, an individual may open an electronic account with a “cash in-cash out center” (which may be a pawnshop) for a measly amount, usually P100. To open an account, the individual fills out a form with the cash in-cash out center and registers his cellular phone number.

Once an account has been opened, the individual may place a deposit by buying a “mobile phone load” from the cash in-cash out center. He will then encode details of the “load” to his electronic account using his cellular phone.

Moreover, an individual with a mobile banking account may also receive money. If someone (who must also have a mobile banking account) sends money to the recipient’s account, the latter shall be notified through text. The recipient may then go to a cash in-cash out center to get his cash.

The BSP said that as the practice of mobile banking further develops, the number of Filipinos that do not access financial services and that do not have bank accounts is expected to

Ma. Belinda Caraan

diminish over the next few years.

Besides providing mobile banking services for low-income Filipinos, Caraan says, pawnshops in the future may also provide other financial services. With proper regulatory framework, the BSP believes there is scope for pawnshops to also sell micro insurance and provide micro credit, she says.

“They serve the important role of making financial services—and even more kinds of such services in the future—reach the poor and those who reside in remote areas. Indeed, pawnshops are important to the economy,” Caraan says.

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Disclaimer: The comments uploaded on this site do not necessarily represent or reflect the views of management and owner of We reserve the right to exclude comments that we deem to be inconsistent with our editorial standards.

  • Aturni

    Even banks prey on their customers… very low interest but a higher charges + tax on dollar account…

    • Pwe Jade

       Supreme Court had recently decided that banks should perform utmost due diligence when granting a loan.

      This is where the problem with the so-called fly by night operations of PUJEDA Builders of Tierra Pura, Quezon City started.

      PUJEDA will fabricate not only house parts but also documents that any unsuspecting client, in good faith, believe all is in order.  Only to find out later that what PUJEDA is bogus and fraudulent.

      If you can warn all who may have any connections with this B*^%S*@#!.

  • Saint Luci

    If pawnshops prey on the helpless, then all businesses should be shut down. Even private schools prey on helpless parents wanting a better education to their children.

    Businesses are in business to make money. Else, they’re a charitable institution.

  • parengtony

    5% of 17000 is 850 erring shops. Is that miniscule?

    500 BSP inspections up to the year 2015 is obviously inadequate and is a major factor for the high number of erring shops.

    The same situation or even much worse is true for Western Union outlets and other non-bank remittance outlets – blatant hold-ups, salisi gang modus operandi, exorbitant exchange rate mar-ups, no dollar bills available, collection of unauthorized taxes, etc. When victims go to the police for assistance nothing ever happens. Why?  

  • JudgeJuanDeLaCruz

    Pawnshops are nothing but legitimized loan sharks with Bangko Sentral mandate.

  • pinaskngmajal

    Mapag samantala ang mga pawnshops,,,jewelry na nagkakahalaga ng mahal, babaratin naman at wala man lang sa kalahati ang magiging sanla at malaki ang intires nila,,,mga mandarambong ang karamihan sa mga pawnshops. Mostly ng customer nila, snatcher at magnanakaw…dito sa europe, may mga police na nag iinbentaryo sa lahat ng jewelry na pumapasok sa sanglaan, nalalaman nila kung nakaw ang ibang mga alahas.

  • Alexander Aamproz

    In Europe it’s a non profit organization run by the churches.

    In Switzerland, also an non profit organization run by the Government…..

    A well known pawn shop’s influent lawyer is going weekly to Singapore
    with tons of money to stash it there, bleeding the Philippines,

    What a pity ! ! !

  • rodben

    Pawn shop is one cause of POVERTY easily to have money even just small amount for food

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