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

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

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 to
this study will transcend this time and age.
Allow us to thank also our fellow student of Philippine School of Business
Administration QC. For the materials that they submitted which we
compiled to complete this study about pawnshop. Studying this problem is
not 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 Professor
in fundamental research for giving us knowledge about the study that we
conduct.
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 that
they 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 of
our 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

Introduction
Pawnbroking existed in the Ancient Greek and Roman Empires. Most
contemporary 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 years
ago no different than today, through the ages strictly regulated by Imperial
or other authorities.
In spite of early Roman Catholic Church prohibitions against
charging interest on loans,
there
is
some
evidence
that
the Franciscans were permitted to begin the practice as an aid to the poor.
Pawnbrokerage arrived in England with William the Conqueror, but known
by 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 in
1415. The Lombards were not a popular class, and Henry VII harried them
a good deal. In the very first year of James I Stuart an Act against
Brokers was passed and remained on the statute-book untilQueen
Victoria had been on the throne thirty-five years. It was aimed at the many
counterfeit brokers in London. This type of broker was evidently regarded
as 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 was
the Indies.
Pawnshop is a business that offers secured loans to people, with items
of personal property used as collateral. The word pawn is derived from
the Latin pignus, for pledge, and the items having been pawned to the
broker are themselves called pledges or pawns, or simply the collateral. If
an item is pawned for a loan, within a certain contractual period of time the
pawner may purchase it back for the amount of the loan plus some agreedupon amount for interest. The amount of time, and rate of interest, is
governed 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 be
offered for sale by the pawnbroker/secondhand dealer. Unlike other
lenders, the pawnbroker does not report the defaulted loan on the
customer's credit report, since the pawnbroker has physical possession of
the item and may recoup the loan value through outright sale of the item.

The pawnbroker/secondhand dealer also sells items that have been sold
outright 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 the
biggest and most successful in their fields. Shoe manufacturing is the best
well-known industry.
The city manufactures food, cigarettes, porcelain and chinaware,
confectionery, automobiles and cars, appliances, electronics, crafts like
bags, 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 own
properties, jewelries and other personal stuffs. The shoe industry declined
due to the imported items especially shoes that flooded the market that
time. To be able to recover the capital that was lost, they pawned some of
their jewelries. By means of these so called pawnshops, people used to
find 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
customers
include jewelry, electronics, musical instruments, and tools (both hand tools
and power tools). Gold, silver, and platinum are popular items which are
often purchased; even if the source (such as a piece of broken jewelry) has
little value, the metals can still be sold in bulk to a bullion dealer
or smelter for the value of the gold, silver, or platinum content.
The pawnbroker assumes the risk that an item purchased was actually
stolen property. However, laws exist in many jurisdictions that protect both
the community at large and the brokers from unknowingly engaging in
criminal activity (buying and selling stolen goods, also known as "fencing").
In some jurisdictions, pawnshops must give a list of all newly pawned items
and any associated serial number to police, to allow the police to determine
if any of the items have been reported as stolen. Some pawnshops set up
their own screening criteria to avoid buying stolen property.

The pawnbroker assesses an item for its condition and marketability by

testing the item and examining it for flaws, scratches or other damage.
Another aspect that affects marketability is the supply and demand for the
item in the community or region.
To assess the value of different items, pawnbrokers use guidebooks,
catalogs, Internet search engines, and their own experience to subjectively
evaluate the goods. Some pawnbrokers have training in the identification of
gems, or they employ a specialist with gem training to assess jewelry. One
of the risks when accepting secondhand goods is that the item may be
counterfeit. Once the pawnbroker has determined that the item is genuine
and not likely to have been stolen, and that it is marketable, the
pawnbroker offers the customer an amount for it. The customer can either
sell the item outright if the pawnbroker is also a licensed secondhand
dealer, or offer the item as collateral.
The Pawn Shop wages general pawn brokering services to the general
public, which includes providing small collateral loans to individuals based
on 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 as
these 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 merchandise
that they can use as collateral. As such, the business should be healthy to
remain 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

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
* Provide higher value for pawned items
* 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

* Low interest rate

* Quick processing
* Provide higher value for pawned items
* 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

PROCESS
5. Strenghts
* Accessibility of the location
* Low interest rate
* Quick processing
* Provide higher value for pawned items
* 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

* 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 low
interest 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 low
interest rate
Figure 1. Research Paradigm
In the research paradigm, the present study was made to study the
marketing strategies and the success factors of the pawnshop business.
On the first component we will look on how this study will influence the
managers, employees, and the customers. The factors from which the
strenghts, weaknesses, opportunities, and threats will determine by

conducting a survey using a questionnare as the research instrument. The

informations that will be gather after the survey will undergo in a evaluation
that may indicate the factors that greatly affect the success of the
pawnshop business.
Statement of the problem
This research study assessed the success factors of the Selected
Pawnshop Busibessses along Sumulong Highway, Marikina.It sought
answers 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 respondents
regarding the strengths and weaknesses of the Pawnshop business when
group according to age?
7. Is there a significant difference among the opinion of the respondents
regarding the strengths / weaknesses of the Pawnshop business when
group according to gender?
Hypotheses
Alternative
-There is a significant difference among opinion of the respondents
regarding the strengths and weaknesses of the Pawnshop business when
group according to age.
-There is a significant difference among opinion of the respondents
regarding the strengths and weaknesses of the Pawnshop business when
group according to gender.

Null
-There is no significant difference among the opinion of the respondents
regarding the strengths / weaknesses of the Pawnshop business when
group according to age.
-There is no significant difference among the opinion of the respondents
regarding the strengths / weaknesses of the Pawnshops business when
group 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 the
business.
2. Customer
* To know further about the services offered by the pawnshop.
* They will be able to choose wisely which pawnshop can give them the
quality 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 studies
regarding this business to related studies or another thesis.

Scope and Delimitations of the study

This study involved 6 pawnshop businesses located along Sumulong
highway in Bayan, Marikina namely: Cebuana Lhuillier Pawnshop, Mamas
Pawnshop, 18th jewelry pawnshop, RR Pawnshop, Capital Pawnshop and
Tambunting Pawnshop. The respondents of this study will 6 managers, 13
staffs and 52 customers of these pawnshops. The research study will cover
the period from Aug to Oct 2011.
DEFINITION OF TERMS
Appraise to make or give an estimate of how much miney something is
worth.
Auction - a sale of goods or property at which intending buyers bid against
one another for individual items, each of which is sold to the bidder offering
the highest price.
Collateral property or goods used as security against a loan and forfeited
if the loan is not repaid.
Counterfeit- made as a copy of something, especially money, in order to
defraud or deceive people.
Credit- an arrangement by which a buyer can take possession of
something now and pay for it later or over time.
Interest- a charge made for a loan or credit facility, or a payment made by a
bank or other financial institution for the use of money deposited in an
account.
Lending- allowing a person or a business to use a sum of money for a
particular period of time, usually on condition that a charge interest is paid
in return
Loan an amount of money given to somebody on the condition that it will
be paid back later.
Pawn brefers to an item of value which the pawner leaves as security
with the pawnbrokerin return for a loan.

Pawnee refers to a pawnshop or pawnbroker.

Pawner refers to the borrower from a pawnshop.
Pawnshop/Pawnbrokerage refers to establishment engaged in the
business of lending money on personal property delivered as security for
loans.
Remittance- money sent as payment for merchandise or services.
Transaction refers 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 pawn
shops. - ALBANY, GA (WALB)
They're often a good indicator of economic prosperity because many
people use them like banks for loans or cash advances.
For the last year, pawn shop owners say most of their customers have
been 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 bargains
on items many would consider luxuries.
A large number of customers spending money has been rare during the
recession. Most of their customers have been pawning their items to get
by.
Many people are still pawning items. Some shops have become more
selective, taking only the newest and best name brand items. But store
owners say the increase of customers spending money is the first positive
economic sign they have seen in months.

The store's redemption rate has been close to 70% recently, meaning most
people 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 followed
similar news from Cash America (CSH) earlier in the day, hinting that the
sudden restriction of credit from banks is pushing more consumers to their
local pawn shop. First Cash Financial Services (FCFS) had the same story
on Wednesday.
EZ Corp reported a net income of $20 million, which was up 39 percent
from 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 those
new stores were only integrated during the last part of the year. So, as
bright 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 credit
available to many Americans at mainstream financial institutions. Credit
card issuers are cutting back credit lines, banks and thrifts are making
fewer mortgage loans, and businesses are struggling to get loans. Each of
these 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 lenders
right now. Both Cash American and EZCorp work in both business, but
pawn is the hot ittem. Morecollateral items are coming in, and most are
going back out. EZCorp had an 81 percent redemption rate. That means
that they get a nice margin on the short-term transaction, but they also
benefit from a customer that is likely to come back next month with the
same tool set, wedding ring, or childrens bike.
As if to underscore the diverging opportunities, First Cash has been selling
or closing its payday stores. Now they only have payday in Texas and
Illinois. It is interesting that they would choose to say in Illinois,
where recent legislation attempts to rein in payday lending.

Pawn shops have a second thing working for them theyre able to gain
from the price of gold.
There appears to be a lot of consolidation, as well as expansion of new
stores. Cash America has opened 81 stores in 18 months. EZCorp has
opened 70 in the last 12 months, and they just purchased 13 stores in
Chicago and Florida. Oh, and everyone is trying to get more exposure to
Mexico.
The banks are doing nothing to thwart this trend. Eliminating free checking
is only going to move more consumers out of the banking system. When
you consider that it was taxpayers that shored up the capital base of the
banks, the abandonment of so many families reflects poorly. In 2009, the
FDIC 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 for
pawnbrokers.
Pawnshop owners scoff at such stories now. The tearjerker tales are no
longer part of the job; everything nowadays is about trying to tell whats real
and whats fake, and the fake goods keep looking more real.
A group of scam artists went around to 26 pawnshops in Seoul putting
down golden pigs as collateral to borrow over 100 million won ($106,000).
The pigs were actually made of lead and coated with gold, but they
weighed the same as solid gold and the pawnbrokers fell for it. The
scammers were eventually arrested.
Pawnbrokers never share their secrets about distinguishing fake goods to
other 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 in
pawnshops these days is a golf bag with a full set of clubs. Men leave their
golf 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.

Prices at pawnshops are set to wholesale figures. For gold, silver and
diamonds, 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 the
wholesale 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 for
more 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, is
to be found on Marlborough St and it too looks a world away from the ultraswish retail outlets on the other side of O'Connell St.
From the outside, it looks like a downmarket jewellery store. There is a
separate entrance for the pawnshop and a worn stretch of linoleum brings
you down to a single counter with a heavy metal grille in place to protect
staff. The furnishings are old-fashioned and far removed from the fittings
you would expect in normal lending institutions, like banks.
Only four licensed pawnshops currently operate in Ireland - a far cry from
1904, the year in which James Joyce's Ulysseswas set, when there were
500 official pawnbrokers in Dublin alone.
"There's no doubt that fewer people are using pawnshops today," Carthy
says. "There are far more sources of credit than there was 20 years ago
when I started running this business. Just look at the number of credit
cards that are issued every week. Moneylenders are doing big business."
Previously, Saturday was the busiest day for Carthy's. Now, the pawnshop
only opens on weekdays.
The Irish experience is very different to that of the UK, where pawnshops
are booming. According to the National Pawnbrokers Association, the
British market is worth 100m per annum and is serviced by 700
pawnshops.
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

with problems reading and writing or difficulty with English, favour its
straightforward service over bank overdrafts and loans.
Carthy says British pawnshops generally charge far more interest than Irish
operators - sometimes five times as much. But the interest rates charged
here are set down by the Office of the Director of Consumer Affairs.
The pawning system in Ireland is simple. The customer hands over their
easily tradeable goods - called pledges - to the pawnbroker, who values
them and advances cash on this valuation. A four-month contract is signed
obliging the customer to pay interest of 2pc per month, or part thereof, on
the cash advance.
The four months can be extended by agreement, but should the pledges be
eventually unredeemed, they are put up for public auction - often going for
a third of their value.
Auctions are usually held twice-monthly by the Rathmines-based
auctioneers Herman & Wilkinson. Jewellery accounts for the vast majority
of pledges, although musical instruments, hi-fi equipment, cameras, golf
clubs and power tools also figure prominently. Pledges are valued just
below wholesale prices and arguments over valuations are a rarity.
Pawnbrokers like Carthy's normally won't take in a pledge valued at less
than 20. Pledges of between 100 and 200 are the typical amounts and a
limit of 9,000 per transaction is set by the Department of Consumer Affairs.
Pawnbrokers maintain they get a wide variety of clientele, but the common
thread that binds them together is the need for immediate credit, coupled
with poor access to more conventional financial channels. Carthy says a
significant minority of clients are foreign nationals, particularly Ireland's
growing Chinese community.
Reputed to be the earliest recorded lending institutions, pawnbrokers
emerged from Europe in the Middle Ages and for many years were the
main source of credit.
They acquired their familiar symbol of the three golden balls courtesy of the
coat of arms of the famous Medici family in Italy. Indeed, Queen Isabella of

Spain is said to have pawned her jewels to finance Christopher Columbus's

trip to America.
In the interim, the business has acquired a slightly less auspicious
reputation and for many conjures up images more reminiscent of a
Dickens' novel than a bona fide credit facility licensed by the Department of
Consumer Affairs.
There is little to stop operators from setting up shop in Ireland. According to
the Director of Consumer Affairs, Carmel Foley, persons must not have a
criminal record or tax arrears, and must be, in legal parlance, "fit and
proper" 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 that
pawnbrokers 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, a
pawn shop at PGCT Center on Phnom Penhs Street 274, betrays what
has become a thriving business in the few short months since it first
opened.
Between last August and now, the company has managed to grow its loan
portfolio to US$1 million, and management is shooting for between $3
million and $4 million by the end of 2011.
Those are strong numbers for an industry that became licensed in
Cambodia only in 2010. Cash-U-Up was the fourth pawn shop to be
licensed 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 insists
that 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.

To help the economy as a whole, to help the low-income people in

Cambodia 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 out
of the shadows.
That, along with a general discouragement of trading in stolen goods, was
the goal when a law was passed back in January of last year demanding
that all pawn shops be licensed, the government has said.
Cash-U-Up is a joint venture between Singaporean investor Steven Lam
and Cambodia-based Vestal Holdings, which operates a wide variety of
businesses in the Kingdom. Its primary function is to loan smaller amounts
of money to customers in return for holding collateral of some sort, whether
electronics, jewelry, motorbikes or cars, though the shop is licensed to
sell the items once people renege on their loans.
People trade valuable goods for temporary credit and later reclaim their
possessions when theyve raised the initial loan amount plus interest for
Cash-U-Up. Largely, these are people who may not have access to bank or
other 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 companys
capital investment. Given that Cash-U-Up started with $500,000, that
means Vong Tith Phearoka can hand out as much as $100,000 to
borrowers. And he said he has.
Faced with competition from unregulated shops, Puthkiry Kim said two
important things keep customers coming through his doors: a low interest
rate 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 safe
until they return for them.

For Hak Mony, that was a selling point. The 28-year-old graduate of the
National University of Business has no full-time job.
Instead he works as a part-time researcher, which doesnt pay enough to
cover his living expenses. As a result, he was forced to pawn his motorbike
for $800 at a 3-percent interest rate. He plans to reclaim the bike before
Khmer New Year, though, and knows that he can trust Cash-U-Up to hold
it.
Confidence is very important for the pawn company. We put [our
valuables] here because they can keep our things very well and with safety
and security.
Just pay the money back, and you can take it back.
Cash-U-Up hopes to expand through an associate programme that would
pay people who referred business to the company. They are looking to
recruit everyone from students to even other pawn brokers to participate.
One Financial Orientation of Chinese SMEs: Pawn Financing and Its Law
and Economics Analysis
Pawn financing had been overlooked for more than two decades in China.
In the current financial crisis, the financing constraints of Chinese private
Small and Medium Enterprises (SMEs) have become more prominent. Due
to the difficulties of financing a large number of Chinese SMEs are in a
difficult financial predicament. Pawnbroking has the advantage of shortterm emergency financing, and we should pay more attention to it. In this
article, the author analyzed many of the pawn business issues, and finally,
put forward his own thinking.
E-pawnshop: investigating the possibility to incorporate the
usage of Internet for pawnshop specific processes
The pawnshop industry is a considerable business today. There is an
obvious and even growing demand for small short term loans. These kind
of loans are something that traditional banks are generally not interested in
offering due to high costs to initiate a loan. Pawnbroking is the oldest
method of

lending money and the way of conduct is virtually still the same.
This means that most processes at a pawnshop are manual. Owners of
SMEs (Small and Medium sized Enterprises, pawnshops included) often
assume that their business is unique and not fitted for incorporating
informational technology such as Internet. This belief often proves to be
incorrect
making the business less effective andtherefore less competitive.
The purpose of this thesis is to investigate and, if possible,suggest possible
improvements for the pawnshop business.
By studying Swedish laws and legislation and examining solutions that a
few Swedish pawnshops are using, a detailed description of work
processes were made. These were used to create a new and improved
work processes focusing on lowering manual workload, in other words
reducing the demand for human input and involvement. This research
shows that the processes at a pawnshop
are actually very fitted for Internet. A big portion of the manual work can be
made more effective and in some cases even automatic. These
mostly concern CRM (Customer Relationship Management) which is an
major part of the workload. An interesting detail that appeared was that the
pawnshop
business, when deconstructed into processes, was not that unique
or 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. If
you own a pawnshop, make sure you understand that it is up to the you
to protect your businesses. MIM Pawnshop Sills and Services always
promotes being a proactive business owner. Experience teaches that it is
important that a pawnshop owners learn to assess their businesses for its
shortcomings.
Back in 2010, we posted an article on pawnshop security when a rash of
bold robberies of pawnshops were being reported on by the Philippine

media. It is titled: Is your Pawnshop secure? If you are a pawnshop owner

we recommend you read it. We think the article is still timely and has the
basic common sense information a pawnshop owners can use to protect
their businesses. For certain, the topic is still timely as you can see by the
article below from philSTAR.com. Unfortunately, this trend of brash
robberies still has momentum in the Philippines. This momentum is likely to
continue, and possibly increase, as jewelry prices increase due to the rise
of gold and silver prices.
If you, as a pawnshop owner, feel you need help to understand the security
issues involved in the pawnshop business, be sure to contact MIM
Pawnshop Skills and Services to set up a consultation appointment.
Pawnshop management is our business and we can bring you the
information you need to keep your pawnshop secure. We support a
proactive approach that identifies the deficiencies before they hit your
bottom line.
MANILA, Philippines Interior and Local Government Secretary Jesse
Robredo warned local officials yesterday on the new modus operandi used
by criminals in robbing jewelry shops, pawnshops and banks.
Based on the information provided by Chamber of Pawnshops of the
Philippines, Robredo said local and police officials should be on alert when
individuals take out leases on vacant business space beside, above, or
behind an existing pawnshop, bank or jewelry shop.
He said these groups start their operations at night, especially on long
weekends, by disconnecting the alarm system and security camera first
then drilling through the adjoining walls to gain entry.
In case there are no vacant spaces for rent close to the establishment and
if it is located near creeks or waterways, Robredo said these syndicates
resort to forcible entry, underground tunneling or passing through a big
drainage system along the street in front of the target establishment.
In this case, they open the floor of the vault of the pawnshop as an entry
point, he said. Robredo called on all barangay officials, as chairpersons of
the barangay peace and order committee, to immediately mobilize on a

regular basis their barangay tanods for routine patrols during the night until
the wee hours of the morning.
Barangay officials should closely coordinate with and immediately report to
the local police any suspicious movements or persons roaming in areas
near the said establishments so that the latter can undertake more in depth
surveillance and make the necessary arrests, he said.
Philippines: Regulator tightens watch on pawnshops
Citing the proliferation of pawnshops across the country, the Bangko
Sentral ng Pilipinas has issued a circular amending and tightening existing
regulations governing small lenders.
The central bank issued Circular 711, an amendment of a previous
measure, stressing the need for officers and employees of pawnshops to
undergo training on the BSPs regulations and anti-money laundering
efforts.
Through money laundering, criminals can make it appear that their dirty
money come from legitimate sources.
Since many pawnshops are now into the business of facilitating
remittances, regulators said they should also be required to report to
authorities suspicious transactions, such as sending and receiving cash
from dubious sources.
Circular 711 likewise states that assets of pawnshops and items turned
over by borrowers as collateral for loans must be insured by companies
accredited by the Insurance Commission.
This is to protect the public against loss of pawned items resulting from
theft and fire.
In the circular, the BSP has also identified people who should not be
designated as directors or officers of pawnshops.
These include individuals convicted of offenses like estafa, embezzlement,
extortion, forgery, swindling, theft, robbery, and violators of graft and
corrupt practices.

The BSP also prohibits persons found to have violated banking laws or
other regulations enforced by other regulatory agencies from being
directors of pawnshops.
The pawnshop industry in the country has grown and developed over the
years. Apart from lending, most shops now offer other services such as
bills payment and facilitation of remittances.
The BSP said enhanced monitoring of pawnshops would be necessary
given 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 of
unredeemed pawned items.
The chamber represents about half of more than 14,000 pawnshops in the
country, including the big Lhuillier and Tambunting chains.
Ablaza says workers, who may have acquired a few assets during the good
years, may resort to pawning. But without regular employment they will be
too hard up to redeem the items.
Then pawnshops will have a problem because we do not expect a market
for foreclosed assets. Who will buy them? But this is assuming our clients
still have items to pawn,? he says.
Ablaza estimates that 95 percent of pawnshops serve Filipinos who would
otherwise have no access to credit. Their clients can?t open bank accounts
because the minimum balance required is too steep, or because they have
no permanent address. So they don?t normally qualify for credit cards or
membership 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, cell
phones and appliances commonly used as collateral. Interest rates

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 loan
current. Loans for which interest has not been paid 90 days after maturity
are deemed expired and pawnshops are authorized to sell the items to
recover their cash.
Remittance centers
Looser credit card requirements in the last 10 years have led to easier
access to cash, resulting in a general decline in the traditional pawnshop
business. This has caused many pawnshops to also act as remittance
centers, offering its storefronts as pickup centers for cash sent by overseas
workers to their families.
We noticed that more and more pawnshops have had to double as
remittance centers. At first, it was considered an add-on service because
pawnshops are quite accessible. But now, more than half of the business
comes from remittance services instead of pawns,says Ablaza.
He says members of the chamber observed that 2008 remittances were
softer, or did not grow as fast as they did in 2007. In addition, pawn
redemption that normally occurs in December when people supposedly
have extra cash did not happen. Rather, more clients came in to pay loan
interest than redeem their jewelry.
We saw a combination of two things that offer a bad prognosis for the
business: remittances came in but the volumes were not as much as we
had expected; and clients probably did not have as much cash as they
wanted because they did not redeem their pawns. It?s going to be a tough
year,? 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 of
activity because of a recession, the Philippines is not feeling the [full brunt
of the] recession yet. This could be why we are not seeing an increase in

pawns. Or it could also be because people no longer have anything to

pawn,Ablaza says.
High-end market
Still, there is a segment of the pawnshop industry that will likely experience
a boom: the high-end market.
Ablaza acknowledges that niche players that focus on the affluent can look
forward to more business in 2009, but remains mindful that the greater
majority of pawnshop clients will be hard up.
License plate
A Bangko Sentral ng Pilipinas mapping operation has found that 26 percent
of pawnshops are not registered, most of them located outside Metro
Manila.
This presents a risk to consumers as unregistered pawnshops may close at
the drop of a hat and clients will have no one to run after for their pawned
items.
It is important, thus, to look for the Bangko Sentral-issued pawnshop
license 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 issued
tigther rules on the operations of pawnshops all over the country to
safeguard its assets particularly of pawned items.
BSP Governor Amando Tetangco Jr. issued BSP Circular 711 series of
2011 amending the Manual of Regulations for non-bank financial
institutions Pawnshops under Circular No. 656 dated June 2009.

Existing rules and regulations specifically affected by the provisions of this

circular are hereby repealed, amended or modified accordingly, Tetangco
stated in the circular dated January 28.
As part of the changes, the BSP introduced a new section on safeguarding
the pawnshop assets replacing the provision on bonding of officers and
employees.
In order to safeguard pawnshop assets (pawned items) and mitigate the
risk of loss arising from malfeasance or fraudulent practices of their
employees, pawnshops shall adopt new measures, the central bank stated
in the 13-page document.
The BSP currently supervises more than 15,000 pawnshops nationwide.
Under the new provision, the central bank requires the bonding of
accountable officers and employees with reputable insurance or surety
companies accredited by the Insurance Commission and establishing
equivalent self-insurance mechanism acceptable to the BSP.
All officers are also required by the central bank to attend a briefing on
pawnshop regulations as well as a seminar on the Anti-Money Laundering
Act.
Furthermore, a corporate pawnshop with total resources of at least P50
million shall comply with the requirement of corporate governance of the
Securities and Exchange Commission (SEC).
The BSP also tightened the rules on the disqualification of directors and
officers wherein persons who have been convicted by final judgement of a
court for offenses involving dishonesty or breach of trust, estafa,
embezzlement, forgery, malversation, swindling, theft, robbery, falsification,
bribery, violation of Batas Pambansa 22, violation of anti-graft and corrupt
practices as well as violation of the Code of Conduct and Ethical Standards
for Public Officials and Employees are permanently disqualified by the
Monetary Board from holding a director position ..
The BSP also bars directors, officers, and employees of closed banks,
quasi-banks, and trust entities who were found culpable for such closure
from holding a director position pawnshops.

Also prohibited are directors and officers of banks found by the BSPs
Monetary Board as administratively liable for violation of banking or other
relevant laws, rules, and regulations where a penalty of removal from office
is imposed.
The BSP added that a new pawnshop applying for an acknowledgement of
registration with a minimum paid up capital of P100,000 may open one
branch subject to compliance with applicable branching requirements.
Every branch of a pawnshop should pay a one-time processing fee of
P1,000 and P500 annual fee upon approval.
The central bank also requires pawnshops to submit a capital build up
program should a crime result in deficiency in its minimum capital or
prudential capital.
Pawnshops with assets of at least P50 million are required also to submit a
copy of their audited financial statements duly received by the Bureau of
Internal 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 a
P300,000 bail to evade prison after the justice department charged him
with a multimillion-peso tax evasion case.
In a statement Saturday, the Bureau of Internal Revenue, which filed the
case against Villarica, said it learned about Villaricas posting of bail a few
days after the Department of Justice found probable cause in the tax
evasion complaint against Villarica.
The justice department said it filed a formal case against Villarica with the
Court of Tax Appeals after finding probable cause in the tax evasion charge
by the BIR.
Citing documents from the tax court, the BIR said Villarica posted a total of
P300,000 worth of bail. The bail has allowed Villarica to keep himself from
getting jailed while the case is being heard in court.
Villarica, sole proprietor of the W Villarica pawnshop, is charged with a
P22.4-million tax evasion case for allegedly failing to pay taxes in 2007

even if he was able to buy a Lamborghini luxury sports car worth P26
million.
Of the P22.4-million cost of the tax evasion case, P16.2 million covers the
tax on luxury items as well as accumulated interests, while P6.2 million is
the cost of the value added tax.
It took the justice department about one year to file a case against Villarica
before 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-profile
individuals or entities to discourage the public from evading taxes or paying
inaccurate amounts of taxes.
The program is aimed at boosting tax collection by the BIR upon President
Aquinos directive for the government not to impose new taxes.
Under the Presidents directive, tax collection should increase by improving
tax administration, particularly tighter audit of taxpayers.
Related STUDIES
Foreign Studies
DEVELOPMENT
OF
ISLAMIC
PAWN-BROKING
SERVICES:DIFFERENTIATING PROFILES OF THEIR RESPECTIVE
PATRONS
Abstract
Traditionally, pawnshops in Malaysia had played the role of poor-mans
bank by providing procedurally non-cumbersome loans against the
mortgage of jewellery and other such small items of value. Though the
oppressive elements of the conventional pawnshops may have been much
reduced by the provisions of the Pawnbrokers Act 1972, the practices are
still inconsistent with the tenets of Sharia. This led, initially, to the
emergence of the first Islamic pawnshop in 1991. Subsequent development

led to the institutionalization of Islamic pawn-broking, initially on a localized

basis in the Islamic dominant states, and currently on a national basis.
SUMMARY AND CONCLUSION
Generally, the Islamicized Conventional Pawnshops continued to attract
the relatively low-income stratum of the society which they had been
serving in their pre-Islamicised form. Besides, they appealed more to the
females than they do to the males. In term of age, their customers are
generally in the early 40s.
In contrast, the institutional Ar-rahn is seen to be carving a market among
the relatively higher income groups compared to the Islamicised
Conventional Pawnshops. It is also seen to be gender neutralappealing
equally well to the males as well as the females. Besides, age-wise they
seem to be attracting a relatively younger segment of the society.
The study offers results that could possibly be used advantageously by the
two groups of Ar-rahn service providers. Besides the demographic
variables that are conventionally used in market segmentation. The study
also offers some lifestyle dimensions that could enrich the development of
marketing 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 the
outdoor advertisements. Besides, they could also appeal to the print media
in view of the inclination to read among their customers. The findings
could also be of help in developing advertising copy. To reach their
customers, the institutional Ar-rahn could possibly employ an outdoor social
setting among a relatively younger group of some economic means. The
converse 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, the
patronage of institutional Ar-rahn is expected to expand in tandem with the
expansion 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

Abstract
Far from being displaced by modernity, the exchange of womens textile
valuables of little practical value but enormous ritual significance is
increasing in importance in Tonga and amongst Tongan migrants in the
industrial West. The dwindling production and heightened demand of these
textile valuables have prompted entrepreneurs to open pawnshops, where
customers who are monetarily poor mortgage valuables and customers
lacking in exchange networks buy unclaimed valuables. Pawnshops
convert valuables into commodities and transform the social relations
among those involved. However, the one emotion that underlies traditional
exchange, shame, remains central to the transactions, albeit in unevenly
distributed 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 analysis
foregrounds objects on the one hand and emotions on the other as shaping
the 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 for
good, pawnshops enable individuals to ne gotiate their own positionality
between family-oriented exchange-based traditional Tonganness and the
needs of the individual in a capitalist and diasporic modernity. We found
both old dynamics and new ones at play in pawning for all invcustomers
who pawn, customers who buy, and entrepreneurs. Continuity
characterizes emotional experience of exchange, with shame figuring
prominently in all aspects of pawning, in the same way that it is the
dominant emotion in ritualized exchange. Whetheentrepreneurs or
consumers, sellers or givers, men or women, homeland- or diasporabased, tenaciously traditional or adventurously modern, Tongans are
subject to the abiding relevance of m as an emotion. How they negotiate
their own shame vis--vis the shame oothers will continue to play a role in
how they incorporate money into their systems of traditional exchange and
how their valuables continue to be markers of identity. Ruptuare found in

the social relations between transactors, and in the uneven distribution of

shame (or perhaps of the fear of shame) among the participants. Both
rupture and continuity characterize patterns of social inequality: the preexisting uneven distribution of wealth makes pawning possible, but
pawning aggravates this uneven distribution. Pawnshop owners place in
the moral order and the exchange system illustrates multiple and
contradictory opinions about what it means to be a cultural insider in
modern ongan society. Furthermore, the identity markers of pawnshop
customers the average ongans are also in flux. Tongan identities are
not fixed, and when Tongans ask one t people they gossip about, What
denomination does s/he belong to? they are emonstrating how aware they
are of the importance of church affiliation as a concentrated index of
peoples 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 by
obligation but also stautraditional, or at the forefront of modernity but flirting
dangerously 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, and
ungrounded (Englund and Leach 2000), we continue to give it a central role
in our annot least because, whatever modernity is, it is the object of so
much desire and the cause so much anxiety for our informants (cf. Osella &
Osella 2006:570). We have argued hea nuanced approach to subjectivities
of 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 different
subjectivthat we should seek an understanding of what changes and what
stays 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 banked
Supplement to the Current Population Survey File to examine how
household use of payday loans and pawnshops as reported in the
supplement in related to limits on loan fees set by some states. We use

information in the basic CPS to measure household demand as related to

the economic and demographic characteristics of households and use this
information to construct demand-adjusted
measures of payday loan and pawn shop use in geographic areas where
states laws permit payday loan stores to operate. We examine how
demand-adjusted payday loan and pawnshop use is related to effective fee
ceilings on these products. We find little relationship between levels of fee
ceilings in their current range and adjusted payday loan usage. Results for
pawnshop indicate somewhat more variation in demand-adjusted usage
over the current range of pawnshop fee ceilings. The results are generally
consistent with conjectures that payday stores can adjust their scale of
operations to maintain profit margins and thus can continue to lend. As
such, the finding suggest that lowering loan fee ceilings up to some point
can benefit borrowers; many of whom report using these loan to meet basic
living 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 financial
sector to development. The loss of wealth and income that followed in its
wake underscored the nexus between robust financial systems and the
reduction in poverty that is expected to accompany economic growth and
development. That crisis, which capped those of the past two decades by
its widespread domestic and international contagion, catapulted the
architecture of the international financial system, and by implication that of
the domestic system, to a position of prominence on the agenda of
international economic issues. It also demonstrated flaws in the ShawMcKinnon1 thesis of financial liberalisation that
was incorporated into the Washington consensus and that was
accompanied by financial sector crises in developing countries during the
decade of the 1980s and 1990s. The attention given to the financial
architecture is intended to make the system

more robust and less prone to crisis and to ensure that financial
intermediation supports steady growth and development. The initial
concern with financial architecture has been
with the international financial system but since the international system
includes a linked network of domestic financial systems, it was inevitable
that the architecture of
domestic financial systems would also come under scrutiny.
This paper examines the reforms of the domestic financial system in
developing countries. It makes the case that developing countries must
continue to strengthen their prudential regulation and supervision of the
financial 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 sector
and economic growth and the second reviews the structure of the financial
systems in developing countries; section three reviews prudential
regulation in developing countries and section four sets out what must be
done to make the system work as intended.
Summary
Developing countries can benefit from the positive relationship between
financial sector development and economic growth but to do so they must
modernise and reform the financial sector and markets. While the first
steps in financial sector reform concentrated on the creation of new and
specialised institutions, endemic crises in the decade of the 1980s and
1990s culminating in the Asian Crisis of 1997-98 also
highlighted the importance of prudential regulation and supervision. Even
though the importance of regulation and supervision to the orderly
development of markets and institutions is clear developing countries have
continued to experience setbacks in the implementation. To make
prudential supervision and regulation work better developing countries
should not neglect the importance of sequencing financial sector
liberalisation and prudential regulation. They should err on the side of
higher capital requirements that set out in the

Basle Core Principles impose tighter lending limits and financial restraints,
have well defined intervention rules that limit forbearance and reduce
political pressure on
Regulators and, above all, they should invest heavily in the training of staff
needed to manage and regulate the financial system.
The U.S. Check Cashing, Money Transfer, Pawnshops and Payday Loan
Services Industry
MarketData Enterprises, Inc. in June, 2008.
Abstract
This updated analysis by Marketdata examines the controversial but
growing "alternative financial services" sector - a $27 billion business
comprised of loosely regulated check cashing, payday loan, money transfer
and payday loan services. These outlets serve 35% of the U.S. population.
Many companies are happy to accept the business of consumers with
spotty 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 they
have come under heavy scrutiny. Critics say these services gouge
consumers with high fees and interest rates, but they do provide more
convenient hours, less red tape, easier credit, and most customers don' t
seem to complain. There are 13,000 check cashing outlets, 11,000 pawn
shops, 25,000 payday loan stores and 467,000+ money transfer agents
competing for this business today. Many outlets/services overlap-providing
multiple services at the same site. The study explores why growth at check
cashers and pawn shops is meager, and the effects of the economic
slowdown.
This new study by Marketdata examines the nature of the business,
reasons for the growth of non-bank services, immigration trends, national
receipts/growth from 1999-2007, 2008 to 2013 forecasts, average store
revenues, customer demographics, key industry trends, federal/state
industry regulation/fee caps, self-service check cashing machines, profit
margins, franchising, gold prices, global remittance trends, consumer debt

levels, reasons for the industry' s past negative image, and more. Findings
of 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 available
business analyses that exists of this market. 13 in-depth company profiles
(with 2005-2007 financials) are provided for: ACE Cash Express, Check
Into Cash, Dollar Financial, Western Union, Moneygram, Ria Financial,
Cash America, EZCORP, First Cash Financial, Advance America, Check
Into 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 from
Islamic schools of jurisprudence (madzhab). Here, one issue becoming
debate among Moslem scholars is the use of mortgaged objects. Rahn is
adopted by Islamic banking and becomes one of its services offered to the
market. In practice, rahn appears as two different products. First, as a
complementary product, that is additional transaction (guarantee/collateral)
for other products such as bai al-murabahah financing. In this case, Islamic
banks can detain debtors mortgaged objects because of transaction.
Second, as an independent product. In some Moslem countries including
Malaysia, rahn has been being used as an alternative for
the conventional pawnshop. Differing from that in conventional, in rahn
debtors are not charged with interest. Instead, they are obliged to pay
entrustment cost, conservancy cost, and custody cost, as well as appraisal
cost. The main difference between such rahn costs and interest is, whereas
interest can accumulate, costs of rahn can be paid once and specified
in advance. People interest toward conventional pawn service is exactly
high because they had to get cash. This can be seen from the increase of
pawnshop turnover from year to year. Rahn

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 optimistically
introduce rahn service. Of course with manners and regulations that are
free 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 some
jewelry and other properties. You can pawn them whenever you encounter
financial difficulties. (Mario Lamberte 1988).
Pawnshops offer financial services known as microlending which is an
important source of credit in many developing countries, especially in Asia.
Pawnshops fill a void left by the banking system. They provide poor and
low-income households with credit that would have not otherwise have
been available and increase competition in the credit markets by providing
an alternative source of credit for those who are frozen out of loans from
banks. This has served as a financial safety net for the poor and lowincome households.
Pawnshops can provide these financial services to poor and low-income
households for a variety of reasons. One is that pawnshops fall under less
regulation than other financial institutions.
Pawnshops used to operate like a sari-sari store with very little government
control. In fact the only time these units came into contact with government
agencies was when they paid business registration fees and income taxes.
They were not even covered by the usury law enacted in 1916. (Mario
Lamberte 1988).
Beginning in 1972, The Bangko Sentral ng Pilipinas (BSP), known as the
Central Bank in 1973.was given the authority and responsibility to regulate
pawnshops. Presidential Decree 114 (29 January 1973) and the Central
Bank Circular No. 374 (13 July 1973) set out specific regulations covering
the operations of pawnshops.

Pawnshops are still among the least regulated businesses that fall under
the authority the BSP. Under the BSPs regulations pawnshops are
authorized to lend, but cannot accept deposits and are required to submit
regular 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 that
will govern all pawnshops operating throughout the country. The new rules
will replace the existing implementing rules and regulations of Presidential
Decree No. 114 also known as the Pawnshop Regulation Act issued in
1973.
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 of
pawnshops must meet certain fit and proper standards to ensure that
pawnshops are owned and run by people without any derogatory record
and to promote good governance. Pawnshops are now required to
maintain a minimum level of capital or net worth in relation to their loan
portfolio as the existing statutory capital of P100,000 has become too small
and it is susceptible to the proliferation of fly-by-night operators.
Another reason pawnshops can provide these financial services to poor
and low-income households is that their loans are backed by hard assets
which lowers the transaction cost to the borrower and the lender and
eliminates the need to analyze the borrowers creditworthiness.
Over time the pawn item has changed. In the past, for example, Mario
Lamberte noted (1988) that pawnshops have preferred lees bulky items
high-value items like jewelry. With the advent of more competition
pawnshops have broadened the type of items they accept as collateral.
This change continues today with the acceptance of computers, cell
phones and other electronic devices as collateral.
Because of the efficiency of pawnshop operations, they have been shown
to be a profitable business. A study for the Philippine Institute for
Development indicates that efficient management of pawnshops allows

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 pawnshops
serve in filling a demand that is not being filled by the more traditional
banking system: It gets credit to those who dont have access to traditional
bank loans and (2) pawnshops operate with large profit margins. This has
not gone unnoticed by small entrepreneurs and job seekers in the
Philippines 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 initial
launch of the M-PESA service on the send money home proposition
because a large proportion of split families in Kenya needed a way to send
money 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 mobile
money providers have been in the market for over ten years, they have
struggled to gain market share in the face of well known and well
established payment providers. Knowledge and usage of mobile money
services are low with less than 4% of users of all payment service providers
reporting usage of mobile money services and awareness of four mobile
money products ranging between 28% and 46%, even though more than
70% of users have access to a cell phone
Our study focuses on the demand side of domestic payment services: bill
payments and money transfers
In 2010, the Bill & Melinda Gates Foundation launched a study with
Bankable Frontier Associates to understand the demand for domestic
payment services in the Philippines and to identify potential opportunities
and unmet needs for mobile money providers to target. The study found
the Philippines is an active and mature payment market, with a myriad of
payment providers, including payment centers, banks and pawn shops to

choose from. Only 28% of respondents reporting they make no payments

and most Filipinos are aware of and using multiple service providers.
In our study, we focused on three primary types of domestic remote
transactions mobile money has the potential to target: bill payment, money
transfers, and loan payments. Bill payments are most common and are
used by 55% of the population. They are followed by transfers (used by
33% of the population), and loan payments (used by 16% of the
population). We did not explore access to financial services, although 29%
of respondents claim to be saving at home or in banks, or other potential
drivers of mobile money that have had success in other countries, such as
public 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 money
transfers. Pawnshops are the preferred channel for money transfers, with
29% of Filipinos citing the leading pawnshops (M Lhuillier and LBC) as the
main payment service provider in the last twelve months. Payment
centers are used to pay bills by 21% of Filipinos while bank transfers are
the prefer method for 17% of Filipinos for both money transfers and bill
payment. Informal transfer options are the primary method for money
transfers and bill payment for 15% of Filipinos. Alternatively, 13% of
Filipinos 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 the
Philippines, providers will not only need to identify a high potential target
opportunity, but also ensure their ability to effectively serve the markets
needs relative to the competition. We have identified user pain points in
the 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 that
may provide either speed, trust or good customer service but none of them
is ideal, leaving room for a service that gives customers more of what they
value.
For bill payments, customers can pay in a bank or payment center. Both
options have their short comings: although banks are trusted (especially

with large amounts), they suffer from long queues, unfriendly and limited
staff. Payment centers are cheap and closer to home than a billers office,
but also suffer from long queues and delays to credit customer payments at
the biller. In addition, neither banks nor payment centers are widely
accessible, especially in rural areas. In fact, 32% of users reported they
would be willing to pay PhP 50 (US$1.50) for bill payment services that do
not require them to leave their home.
For money transfers, customers have the option of using banks, big brand
money transfer services, pawnshops or informal channels. Pawnshops are
the most popular given their ubiquity, trusted brand and speed (if picked up
at the pawnshop) but the most popular pawnshops, M Lhuillier and
Cebuana, are not completely customer friendly. M Lhuillier has long
queues, strict verification and unsafe locations and Cebuana has high
fees. The larger transfer companies like Western Union and LBC have
high 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 complain
that their neighbors know when money is delivered. Consumers also
complain 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 providers
find it difficult to convince consumers to try a mobile payment service as
evidenced by low usage figures (4%) compared to other payment options.
According to our study, users of one type of payment providers tend to be
sticky. Our survey conducted among users of payment services found that
fewer than 10% of one-time users have stopped using a service. They also
tend to think their payment service is the best, providing high scores on
trust, convenience, speed, security, fees and customer service. Users say
they 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 market
segments not served by formal providers such as personal direct payers
and users of informal service providers.

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 payment
centers. The vast majority of personal direct payers (75%) indicate that
they trust only themselves to deliver payments, although 57% agreed that
paying bills would be easier to do via a third party. Perhaps by tackling the
issue of trust, mobile money operators can convince these potential
customers, who tend to be male, to try their services for the convenience
they 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 for
smaller, regular transactions. These users tend to be rural and poor
women who generally make bill and loan payments intra-island. In fact,
these users in rural areas rarely pay bills or loans through formal service
providers, and when they do, they use the leading pawnshop. Although
informal options are low cost, they suffer from delays, the sender has no
automated confirmation of when the money arrives, funds can be stolen,
and unanticipated costs may arise (such as tips or paying for food or petrol
of the deliverer). Similar to a country that does not have many formal
payment options, such as Kenya pre-MPESA, providing an alternative to
the 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 lower
value transfers between family and friends that occur informally and that
higher cost channels (including pawnshops) cannot profitably serve. Our
study 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 a
purchase or pay a bill but do not have enough money. The rest seek
money from alternative sources: 15% will do something to earn the money
themselves, 12% will wait for their salary and 10% will go to an ATM to
withdraw cash. Filipinos also regularly send or receive money, for
emergencies, daily household expenses, education, bill payment, or
business expenses. Sweeping these low value transactions through
mobile money services would mean a significant increase in their volume of
transactions as well as customers. In addition, 33% of all users said if they

could make cross payments between mobile money schemes, then they
might find this persuasive enough to try them.
Next steps for mobile money providers
During the last ten years, mobile money providers in the Philippines have
struggled to gain traction in the market. They compete against an active
payment market with numerous strong alternative channels for bill
payments and money transfers. However, these alternatives are far from
ideal, according to customers themselves, and niches exist in the payments
market that have not been targeted.
Mobile money providers have an opportunity to attract customers away
from existing payment options, persuade customers to use their services in
addition to their current payment provider or to target segments that are not
currently served by formal payment providers, such as personal direct
payers and users of informal service providers. In addition, they may have
an opportunity to capture lower value transfers.. The challenge faced by
mobile money will be to encourage customers to try their service and to
convince them through early trials of the superior value of the service. The
extent to which they will succeed in doing so will depend on the investment
mobile operators are willing to make in strategic marketing, getting their fee
structures 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 and
interpretation 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 for
so many years despite of the unstable economic and political condition of
the country.

Four of the respondent pawnshops have existed for more than sixteen
years. While others have been in business for 6-15 years, only one
pawnshop has been operating within five years. This is the newly
established pawnshop.
1.2 ORGANIZATIONAL STRUCTURE
All of the pawnshops are registered with the Securities and Exchange
Commission (sec) and regulated by Central Bank of the Philippines (CB)
pursuant to PD NO. 114- regulating the establishment and operation of
pawnshops.
These pawnshops are issued by these governing agencies circulars
quarterly, representing 56 percent of the total population.
Findings of the study revealed that the nine pawnshops or majority of them
were organized as corporation as supported by information gathered from
the Securities and Exchange Commission (SEC).
1.3 CAPITALIZATION
Majority of the respondents were initially capitalized at P100, 000 but less
than P200, 000 in compliance with PD NO. 114 wherein the minimum
capital is P100 000.
As gathered from the data collected about 20 percent of the present capital
is borrowed. However, as the volume of loan increase, likewise increase
their capital through borrowings. With the present economic condition, the
bigger the capital, the better chances the industry to survive wherein
competition with other pawnshops in terms of interest rate, mode of
interest, 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 total
assets ratio, debt-to-equity ratio and current assets ratio.

2. OPERATIONS OF THE BUSINESS

The operation of pawnshops is based on the guidelines and rulings of the
central bank of the phil. Under PD NO. 114- Regulating the establishment
and operation of pawnshops.
They are also registered with the Securities and Exchange Commission for
corporation 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 by
the pawnshops are acceptance of plated or fake articles, over appraisal of
items pawned, individual letters sent to pawners for maturing loans are not
received on time and strict compliance of central banks reportorial req.
4. CONTRIBUTION OF PAWNSHOP TO THE ECONOMY OF THE
COUNTRY
Pawnshops play a vital role in the economy of the country. They contribute
tremendously to the socio-economic needs of the people by providing
immediate loan. These loans are obtained at the easiest way and at lower
interest 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 to
grow 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 the
odds. Only one pawnshop has been in operation within 5 years . This goes

to show that the pawnshop business is a profitable one, hence they had
gone so far in the industry.
1.2 Organizational Structure
The respondent pawnshops are family corporations registered with the
Securities and Exchange Commission. Therefore, the management of the
business is handled by the members of the family and all profits divided
between the capital partners.
1.3 Capitalization
About 20 percent of the present capital of the pawnshops is borrowed from
banks.
Majority of the respondents were initially capitalized at P100,000 but less
than P200,000 in compliance with PD NO. 114- Regulating the
establishment (.) and operation of pawnshops wherein the minimum
capital is P100, 000.
1.4 Profitability, Stability and Liquidity
The profitability, stability and liquidity of pawnshops casured by the relevant
ration 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 the
phil. (CB) pursuant to PD no. 114-Regulating the Establishment and
Operation of Pawnshops. Likewise, they are also registered with the
Securities and Exchange Commission for corporations and with the
Department of Trade and Industry (DTI) for single proprietorship.
3. Problems Encountered by Pawnshops
Several problems encountered by pawnshops poses as a hindrance for its
growth and development in the country.
4. Contribution of Pawnshop to the Economy the Country

Pawnshops have given considerable contribution to the economy of the

country. It has a well-defined role in the community and it is the only nonbank finance institution that provides instant credit to everyone which
cannot 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, thus
contributing 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 good
and promising despite of the economic situation of the country. Due to the
high 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 are
forwarded by the researcher:
1. The minimum capital requirement of the pawnshop industry be increased
from 100,000 to 300,000 for the business to operate profitably and
competitively with other pawnshop and finance intermediaries.
2. Pawnshops should be organized on a more scientific basis of
management 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 Pawnbrokers
Association 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 to
protect them from being victims of fraudulent pawn.
4. With the intricacies pointed out in connection with the seemingly simple
business, the pawnshop owners should have a sound knowledge of the key
functions of the business, ike bookkeeping and safe keeping.

5. For the future investor he should be prepared to invest more than the
required minimum capital prescribed for more profit, better chance of
survival and to operate competitively with other pawnbrokers.
More pawnshops to be established would create employment opportunities
for 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 at
least seven years and are formed as sole proprietorship. Three of the
respondents have branches in the city. Two of which have been in the
pawnshop business for a long time while one establishment opened other
branches even though it is new in the business. Two establishments have
three branches in other areas.
2. The most common amount for initial capitalization is in the range of
P300,001 to P500,000. The money came from the owners own pockets
and from borrowings.
3. The maximum number of employees hired per pawnshop establishment
averaged three to four. Hence, multi-tasking is employed in the
establishments as the employees handle numerous tasks. A significant
number 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 of
training varies since some of the owners send their appraisers to formal
training 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 their
establishmentis its accessibility. Four out of six respondents are located in
the same street.

6. The most common type of collateral accepted is jewelry. Market value,

appearance and ksrat are the three most common criteria in jewelry
valuation. Competition greatly affects the valuation of collateral.
7. At present, the prevailing interest rate is between five to six percent per
month. It is during the month of June when people need money the most
while pawners tends to redeem their pawned items during the month of
December. Since pawners are required to pay interest on a monthly basis.
Renewal process does not have peak months. Auctions are usually
scheduled during December since employees are receiving their bonuses
and thus, have extra money. The average loan amount per transaction in
the cotobato area is P500 and below. When asked about the average
number 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 average
percentage of pawned items redeemed, renewed and auctioned between
the range of 26 to 50 percent for each process.
8. Pawnbrokers usually schedule their auction three to four times in a year
and they sell the items either in wholesale or retail. Auction is believed to
generate mor profit than the other three processes.
9. The ability of the company to generate profit based on sales is topped
establishment E, while establishment A ranked first in its ability to generate
the adequate return on equity an assets. On the aggregate, the average
ROS, ROE and ROA of selected pawnshops were catching up with the
industry averages for the same period per BSP records.
10. There is a significant relationship between capital structure and
profitability particularly on return on sales. ROE and ROA did not show
significant relationship with capital structure.
CONCLUSIONS:
Pawnbroking is still a lucrative business to engage in, despite all the
challenges faced by the pawnshop owners but effective management is
needed to ensure the business remains profitable in the future. Hence, the
assumption is correct that pawnshop business is profitable.

The highest percentage of pawnshop profitability comes from the auction

process. Therefore, the assumption that pawnshops make more money
from the interest earned in lending, redemption and renewal incorrect.
There is a significant relationship between capital structure and profitability
particularly on return on sales, hence the hypothesis that there is no
significant relationship between capital structure and profitability.
Recommendations:
1. Pawnbroker must see to it that they have a steady flow of capital in a
pawnshop business since pawnbroking is seasonal as evidencedby the
peak months in lending and in redemption.
2. Anyone who wants to open a pawnshop or a new branch must make
sure that the location is accessible and in a commercial area where people
frequent. Pawnbrokers must find location that are not yet saturated by
competitors.
3. Pawnbrokers must continually educate themselves about the new
techniques 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 higher
ROS, ROE and ROA.
5. Pawnbrokers must improve their equity and asset utilization in order to
have better ROE and ROA.
6. Offer excellent service to customers by understanding the culture and
traditions of the Mslims. Thus, gaining competitive advantage over the
competitors.
7. The law-making bodies mustincrease the amount of initial capitalization
of the pawnshop establishment since higher profitability. Bangko Sentral ng
Pilipinas, must require appraisers to undergo a licensure examination to
ensure that they are qualified to work as such. They also need to review or
revise any regulations that does not anymore answer the need of the
pawnbrokers and the pawners.

Electronic Banking: Delivering Microfinance Services to the Poor in the

Philippines
Abstract
Microfinance has proven to financial institutions (i.e. banks) that the
services they provide to their traditional clients can also be offered to poor
and low-income entrepreneurs and clients, in a sustainable and viable
manner. These institutions have seen that reaching out to the majority of
the countrys population, which is the low-income market, does not
necessarily mean a losing proposition for their institutions.
Similarly, it is only appropriate that the more efficient and cheaper methods
of providing these financial services, such as electronic banking services,
which are offered to valued traditional bank clients, should also be offered
to microfinance clients. The increased convenience and lowered costs
arising from innovations in electronic banking should also benefit the poor
and low-income clients.
This paper will present a brief overview of the microfinance industry in the
Philippines as well as the recent developments of increased
commercialization. Commercialization of microfinance has spurred greater
competition leading to increased innovations in microfinance products and
service delivery.
Two case presentations will be made on existing models in which
technological innovations of electronic banking are being used specifically
to serve microfinance clients. First, is the use of mobile telephones through
the short messaging services (SMS) to pay for microfinance loan
amortizations using electronic cash platforms. The other case is a brief
example of the distribution of Automated Teller Machine (ATM) cards to
microfinance 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 regulation
particularly by the Bangko Sentral ng Pilipinas will be undertaken. The
direction of policy, existing relevant regulations and rules will likewise be
presented.

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 the
customers, managers, and employee of an entity. It also describes the
current nature and current event on the business. It is able to discuss the
progress and the accurate data needed to make this research study
possible. This method is also used for frequencies, calculation and others
statistical figures related on the business.
Furthermore, all the necessary details were gathered through giving away
questionnaires to the respondents and conducting a survey. The
researchers provided survey instruments particularly- questionnares to
hear what truly exists regarding the business. The data were tabulated
according to its group depending on the concerns like the gender, age, the
number of employees and staffs and customers per day.
The study also includes the research instrument used and procedures on
gathering the data. The data gathered were calculated, tabulated, classified
and defined properly through the use of tables and figures.
Research Locale
Marikina, officially the City of Marikina, known as the Shoe Capital of the
Philippines.
Bayan, Marikina is the town centre of the Marikeos. It is an accessible
location in buying commodities for household facilities and other personal
needs. 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 |

2. 18th Jewelry Pawnshop | 3 | 21 |

3. Capital Pawnshop | 2 | 20 |
4. Mamas Pawnshop | 2 | 20 |
5. Palawan Pawnshop | 2 | 20 |
9. Tambunting Pawnshop | 2 | 5 |
Total | 13 | 106 |
Table 1.1
Table 3.1 A
Age of the Respondents (Employees/Manager)
Age | Frequency | Percentage |
Below 20 | 0 | 0% |
21-30 | 5 | 26% |
31-40 | 11 | 58% |
41-50 | 1 | 5% |
50 Above | 2 | 11% |
Total | 19 | 100% |
58% of the employees/managers of the Pawnshops involved belong to the
age bracket of 31-40. This may infer that most pawnshop owners prefer
their employees to be within this age bracket because they already have
work experiences.
Table 3.1 B
Age of the Respondents (Customers)
Age | Frequency | Percentage |

Below 20 | 3 | 6% |
21-30 | 15 | 29% |
31-40 | 12 | 23% |
41-50 | 13 | 25% |
50 Above | 9 | 17% |
Total | 52 | 100% |
The questionnaires distributed were mostly answered by respondents ages
21-30 garnering 29% of the total number. It seemed that this age bracket
patronize pawnshops due to their needs because this age is where people
are looking jobs. We all know that we spend some money in looking for a
job because of getting the requirements needed by the company you are
applying at or some are in an early marriage or family.
Table 3.2 A
Gender of the Respondents (Employees/Manager)
Gender | Frequency | Percentage |
Male | 7 | 37% |
Female | 12 | 63% |
Total | 19 | 100% |
Among the Employees/Managers, 63% are females and the remaining 37%
are males. It shows that pawnshop businesses are dominated by females,
this might due to the reason that females can transact better by their
communication skills rather than males.
Table 3.2 B
Gender of the Respondents (Customers)
Gender | Frequency | Percentage |

Male | 19 | 37% |
Female | 33 | 63% |
Total | 52 | 100% |
Female respondents comprise 63% of the total sampling size while the
remaining 37% were distributed to male respondents. This is likely to infer
that more female are engaged in pawning maybe because they are also
the one who are in-charge of budgeting within the family.
The Subject Population
The researchers selected six (6) pawnshops as a subject in the subject
area of this study- namely the Cebuana Pawnshop, 18th Jewelry
Pawnshop, Capital Pawnshop, Mamas Pawnshop, RR Pawnshop and
Tambunting Pawnshop. The researchers also selected the population or
the respondents randomly in no particular order in each subject pawnshop.
The researchers will give out questionnares on each subject pawnshop
having a total number of 71 respondents overall. And having a sample size
at least 52 is required to for the statistics to perform.
Sampling Design
As seen below is the computation using sample size formula.
n= N n= sample size
1+Ne2 N= population size
e= margin of error- 10%
For Employees:
n= 19
1+(19)(.102)
n= 19
1.19

n= 16
For Customers:
n= 106
1+(106)(.102)
n= 106
2.06
n= 52
Research Instrument
The study will use survey questionnaires to gather relevant data. Moreover,
the researcher will also use studies related to the performance of a
pawnshop and will compare to its existing data in order to provide
conclusion and competent recommendations. A self-administered
structured questionnaire will be employed by the researchers so as to
come up with an analysis and evaluation of customers perception. The
research instruments were made for the managers/employees comprises
the strengths, weaknesses, opportunities, and threats of their business
which they have to rank using ordinal numbers. Factors on how effective
their marketing strategies were also included. On the other hand,
questionnaire for the costumers includes their profile particularly their age
and gender. Customers will choose rank their perceptions on why or why
not they patronize pawnshop.
Date Gathering Procedure
The researchers will make use of questionnaires as essential tools in
gathering data regarding the performance of pawnshops within Bayan ,
Markina. A number of selected owners, employees and customers will be
courteously given this to gather their percepttions on certain information
with regards to the subject. Afterwards, the researchers will compile the
questionnaires dustributed and tally the results. Findings will be presented
in tabulated form, through graphs and tables, to further understand the
gaps and diffrences found out.

Statistical Treatment
The results from the data through the use of quetionaires were gathered,
tabulated, described and well analyzed. Arithmetic Mean, Ranking,
Frequency and Spearmans test are use to calculate the result of this study.
5. Arithmetic Mean
X= fx
f
Where: X= Weighted Mean
fx= Sum of all products of f and x
f= Frequency of each weight
x= the weight as 5, 4, 3, 2, 1
f= sum of all the cases or respondents
6. Ranking
This assigns and put in order and in sequence the classifications according
to its rank or position by using ordinal numbers (by 1, 2, 3, 4 or 5).
7. Frequency
It is actual number of respondents to the questionnaires or in a particular
item in the questionnaires.
8. Spearmans Test
P= 1- 6xd2
n(n2-1)
Where: d2= square of the difference
d2= summation of the squared of the difference
n= number of categories

n2= squared number of categories

9. Chi-square Test
X2= (O-E)2
E
Where: X2= chi-square
O= expected frequency
E= observed frequency
CHAPTER IV
PRESENTATION, INTERPRETATION AND ANALYSIS OF DATA
This chapter presented, interpreted and analyzed the data gathered in our
survey questionnaires starting from the SWOT analysis and marketing
strategies of the pawnshops until the number of times and reasons for a
customer to visit a pawnshop.
Table 4.1
Strengths of Pawnshops according to Owners/Employees
Reasons | Frequency | Rank |
Accessibility of the location | 18 | 1 |
Low interest rate | 10 | 4 |
Quick Processing | 17 | 2 |
Provide higher value for pawned items | 12 | 5 |
Quality service | 14 | 3 |
The respondents think that accessibility of the location is a highly significant
strength of their pawnshop business because it is the most important factor
when satisfying their customers wants. Customers definitely seek for

pawnshop that is nearest than the other especially when there are
emergency situations.
Table 4.2
Weaknesses of Pawnshops according to Owners/Employees
Reasons | Frequency | Rank |
Inaccessibility of the location | 3 | 2 |
High interest rate | 2 | 3 |
Slow processing | 3 | 2 |
Lower value for pawned items | 6 | 1 |
Poor service | 6 | 1 |
The respondents think that lower value for pawned items and poor service
are the highly significant weaknesses of their pawnshop business because
people seek for higher value for pawned items and quality service that will
meet their needs and satisfaction.
Table 4.3
Opportunities of Pawnshops according to Owners/Employees
Reasons | Frequency | Rank |
Add-on service | 11 | 1 |
Improvement of facilities | 4 | 3 |
Additional branches | 4 | 3 |
Increasing number of customers | 6 | 2 |
Economic crisis | 2 | 4 |
The respondents think that add-on service is the highly significant
opportunity of their pawnshop business because it can attract the

customers to acquire their services. People want that they will just go to
one pawnshop where they can acquire the services that they need.
Table 4.4
Threats of Pawnshops according to Owners/Employees
Reasons | Frequency | Rank |
Burglary/robbery | 12 | 1 |
Unsafe surrounding/environment | 10 | 2 |
High cost of store rental | 8 | 3 |
Competition to huge outlets | 7 | 4 |
Economic stability | 4 | 5 |
The respondents think that burglary/robbery has a great effect on the
threats of their pawnshop business because their business is about
pawning jewellery, gadget, other valuable things and its all about money
which catches their attentions.
Table 4.5
Marketing Strategies of Pawnshops according to Owners/Employees
Marketing Strategies | Frequency | Rank |
Advertising through news, print or media | 5 | 1 |
Usage of internet | 3 | 3 |
Sponsorship of event | 4 | 2 |
Tying up with bank institutions | 2 | 4 |
Loyalty discount | 4 | 2 |
The respondents think that advertising through news, print or media is the
most effective way of marketing strategy of their pawnshop business it can
be distributed by the employees and can target specific group of people.

Table 4.6 Frequency of Visits

Frequency of Visit | Frequency | Rank |
Once a week | 7 | 3 |
Once a month | 23 | 1 |
Twice a week | 6 | 4 |
Twice a month | 7 | 3 |
Occasional | 9 | 2 |
The table shows that 23 out of 52 respondents visit a pawnshop once a
month. Most respondents often go to a pawnshop maybe because they
only visit the establishment when needed.
Table 4.7 Pawned Items
Items | Frequency | Rank |
Jewelry | 30 | 1 |
Electronics | 12 | 3 |
Tools | 3 | 4 |
Musical instrument | 0 | 5 |
Gadgets | 16 | 2 |
Out of 52 respondents, no one answered that they pawn musical
instruments when they visit a pawnshop. Tools fall on the fourth and
electronics on the third rank. Gadgets as the second rank, may infer that
nowadays, technology play a big role in the economy. Garnering 30 out of
52, jewelry falls under the first rank which is the highest. Maybe because
jewelry has the highest value than the other item especially those which are
gold platted jewelries.
Table 4.8 Why They Patronize the Pawnshop

Reasons | Frequency | Rank |

Accessibility of the location | 32 | 2 |
Low interest rate | 27 | 3 |
Quick Processing | 25 | 4 |
Provide higher value for pawned items | 33 | 1 |
Quality service | 33 | 1 |
The respondents think that higher value for pawned items and quality
service are the highly significant reasons why they patronize a pawnshop
because this will satisfy their needs.
Table 4.8 Why They Patronize the Pawnshop
Reasons | Frequency | Rank |
Inaccessibility of the location | 16 | 1 |
High interest rate | 16 | 1 |
Slow processing | 10 | 3 |
Lower value for pawned items | 15 | 2 |
Poor service | 15 | 2 |
The respondents think that inaccessibility of the location and high interest
rate are the highly significant reasons why people dont patronize a
pawnshop because people want that the pawnshop be located in a more
accessible place and want to have lower interest rate.
Conclusion
Based on the findings, the following conclusion are drawn: It can be
concluded that the null hypothesis by which there is no significant
difference among opinion of the respondents regarding the strengths and
weaknesses of the Pawnshop business when grouped according to age
and gender is accurate.

As for the marketing strategies, advertising through news, print or media of

pawnshops is the most effective and the latter follows; it can be distributed
by the employees and can target specific group of people. As of their
loyalty discount and sponsorship of events, pawnshop employees agree
that these attract the customers.
Recommendation:
Pawnshops provide various services to people who seek to satisfy their
needs. Managing a pawnshop is not simple, there are threats that may lead
to the failure of the business. Based on our research, burglary/robbery is on
the top of it. The researchers therefore recommend the following:
* To locate their pawnshop in a strategic location which is more accessible
to the customers.
* To have a higher value for pawned items and develop a quality servuce.
* To have all kinds of pawnshop services that a customer needs s that the
customers will always go to them than transfering from oe pawnshop to the
other just to acquire different services that they need.
* To have security precautions within the area for the the safety of the
employees and customers.
* To focus more on advertising through news, print, or media as their
marketing strategy.
BIBLIOGRAPHY
Agcaoili, Lawrence., BSP tightens rules on pawnshops. The Philippine
Star
Bisnon, Bonia P., Profitability of selected pawnshops in Cotobato City. (M.
Bus. Adm)- University of Southeastern Philippines
Bulosan, Adoracion., A study of Pawnshops in Cubao, Q.C-1991
Jimenez, Eduardo C. and Roman, Pia Bernadette., Electronic Banking:
Delivering Microfinance Services to the Poor in the Philippines.
http://www.bwtp.org/pdfs/arcm/Jimenez.pdf.

Lamberte, Mario., An Analysis of the Role of Pawnshops in the Financial

System. Manila: Working Paper Series no. 88-07, Philippine Institute for
Development
Studies,
June
1998,
36
pp.http://www3.pids.gov.ph/ris/wp/pidswp8804.pdf
Meagher, John., Pawnshops living on borrowed time due to lack of
interest.
http://www.independent.ie/unsorted/features/pawnshops-livingon-borrowed-time-due-to-lack-of-interest-185693.html
Mendoza Salvador, Ma.Isabel., A brief overview of the role of pawnshops
in the Philippines. http://mimpss.wordpress.com/2010/05/23/a-briefoverview-of-the-role-of-pawnshops-in-the-philippines/
Microsoft Encarta 2009., 1993-2008 Microsoft Corporation. All rights
reserved.
Remo, Michelle V., Pawnshop owner posts P300k bail on P22M tax
evasion
case.
Philippine
Daily
Inquirer;
http://newsinfo.inquirer.net/28899/pawnshop-owner-posts-p300k-bail-onp22m-tax-evasion-case
Sison- Paras Carla., Pawnshops lifeline in hard times. Philippine Daily
Inquirer
http://opinion.inquirer.net/inquireropinion/talkofthetown/view/20090201186721/Pawnshops-lifeline-in-hard-times
Sung-ho, Baik., For pawn shops, fake goods are deadly enemies.
http://joongangdaily.joins.com/article/view.asp?aid=2748834
The Bill and Melinda Gates Foundation., Mobile payments in the
Philippines:
Future
Opportunities
for
Growth.
http://mmublog.org/blog/mobile-payments-in-the-philippines-futureopportunities-for-growth/
Letter to the Respondents
SIR/MADAM,
We, the Research students from the Philippine School of Business
Administration- Quezon City, are currently conducting a survey regarding

our research project entitled, Selected Pawnshop Businesses along

Sumulong Highway, Marikina City: Factors of Success.
In this regard, please allow us to conduct a survey of your employees and
customers. We assure you that all the data that will be gathered will be
dealt with confidentiality. We are hoping for your cooperation to make this
research possible. Thank you and God Bless!
Respectfully yours,
Ralf S. Vico
John Michael T. Soria
Charmaine S. Tesalona
Mariel N. Nieto
Leira Susana A. Escala
Noted by:
Dr. Carolina D. Ditan
Adviser/Research Professor
Questionnaire for Employees/Manager
Gender:
( ) Male
( ) Female
Age:
( ) below 20 years old
( ) 21 to 30 years old
( ) 31-40 years old
( ) 41-50 years old

( ) 51 yrs old and above

1.
2. What are the strengths of your Pawnshop?
Kindly rank your answers from a scale of 5 to 1 where in:
Legend: 5-Highly Significant
4-Moderate Significant
3-Significant
2-Less Significant
1-Not Significant
STRENGTHS | 5 | 4 | 3 | 2 | 1 |
Accessibility of the location | | | | | |
Low interest rate | | | | | |
Quick processing | | | | | |
Provide higher value for pawned items | | | | | |
Quality service | | | | | |
3. What are the weaknesses of your Pawnshop?
Kindly rank your answers from a scale of 5 to 1 where in:
Legend: 5-Highly Significant
4-Moderate Significant
3-Significant
2-Less Significant
1-Not Significant

WEAKNESSES | 5 | 4 | 3 | 2 | 1 |
Inaccessiblility of the location | | | | | |
High interest rate | | | | | |
Slow processing | | | | | |
Lower value for pawned items | | | | | |
Poor service | | | | | |
4. What are the opportunities of your Pawnshop?
Kindly rank your answers from a scale of 5 to 1 where in:
Legend: 5-Highly Significant
4-Moderate Significant
3-Significant
2-Less Significant
1-Not Significant
OPPORTUNITIES | 5 | 4 | 3 | 2 | 1 |
Add-on service | | | | | |
Improvement of facilities | | | | | |
Additional branches | | | | | |
Increasing number of customers | | | | | |
Economic crisis | | | | | |
5. What are the threats to your pawnshop?
Kindly rank your answers from a scale of 5 to 1 where in:
Legend: 5-Highly Significant

4-Moderate Significant
3-Significant
2-Less Significant
1-Not Significant
THREATS | 5 | 4 | 3 | 2 | 1 |
Burglary/robbery | | | | | |
Unsafe surrounding / environment | | | | | |
High cost of store rentals | | | | | |
Competition to huge outlets | | | | | |
Economic stability | | | | | |
6. What are the marketing strategies used your pawnshop?
Kindly rank your answers from a scale of 5 to 1 where in:
Legend: 5-Highly Significant
4-Moderate Significant
3-Significant
2-Less Significant
1-Not Significant
MARKETING STRATEGIES | 5 | 4 | 3 | 2 | 1 |
Advertising through news, print or media | | | | | |
Usage of internet | | | | | |
Sponsorship of events | | | | | |
Tying up with bank institutions | | | | | |

Loyalty Discount | | | | | |
Questionnaire for Customers
Gender:
( ) Male
( ) Female
Age:
( ) below 20 years old
( ) 21 to 30 years old
( ) 31-40 years old
( ) 41-50 years old
( ) 51 yrs old and above
1. How often do you visit the Pawnshop?
___ Once a week
___ Once a month
___ Twice a week
___ Twice a month
___ Occasional
2. What do you usually pawn when you visit the shop?
___ Jewelry
___ Electronics
___ Tools
___ Musical Instruments

___ Gadgets
3. What are the reasons why you patronize this pawnshop?
Kindly rank your answers from a scale of 5 to 1 where in:
Legend: 5-Highly Significant
4-Moderate Significant
3-Significant
2-Less Significant
1-Not Significant
Reasons | 5 | 4 | 3 | 2 | 1 |
Accessibility of the location | | | | | |
Low interest rate | | | | | |
Quick processing | | | | | |
Provide higher value for pawned items | | | | | |
Quality service | | | | | |
4. What are the reasons why you dont patronize this pawnshop?
Kindly rank your answers from a scale of 5 to 1 where in:
Legend: 5-Highly Significant
4-Moderate Significant
3-Significant
2-Less Significant
1-Not Significant
Reasons | 5 | 4 | 3 | 2 | 1 |

Inaccessiblility of the location | | | | | |

High interest rate | | | | | |
Slow processing | | | | | |
Lower value for pawned items | | | | | |
Poor service | | | | | |
VICINITY MAP OF SUMULONG HIGHWAY ALONG BAYAN, MARIKINA
CITY