philippines pawnshop market report 2020| pawnshop philippines
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• Future growth of Philippines Pawnshop Market is expected to be led by a surge in the working sector of the country due to requirements of short term cash by salaried class and middle class families. This will also be bolstered by the continued zeal of domestic Filipinos to send money to their families especially at the times of festivals. • The expansion strategies of several pawnshops such as Cebuana Lhuillier, M Lhuillier, Palawan Pawnshop and others, are likely to result in opening up of more locations offering cash remittance services and spreading up their network of pawning.TRANSCRIPT
Philippines Pawnshop Market Report – 2020:
Ken Research
The basic idea behind the pawnshops is to lend money against collateral. The
banks also perform the similar function however there are certain
fundamental differences between the operations and lending procedure
from both source of finances i.e. banks and pawnshops. It has been
observed that the customers generally approach pawnshops when there is
urgent and upfront need of cash with the individuals. Moreover, when the
customer does not have a strong credit worthiness that disable him to
borrow money from formal sources of finance, in that case the customer
resort to the pawnshops.
Pawnshops generally lend money to the customer against some articles been
put in place of equal or higher value. The credit is offered on an estimated
market value of the asset and the item is kept until the principal loan and
interest amount is paid back. At the same time, the banks also provide
personal loans; however, the banks impose stricter requirements and tend
to have longer processing times in comparison with a pawnshop. The poor
functioning of the banks in Philippines have provided a higher popularity
to other informal sources of credit such as pawnshops. Pawnshops these
days have been growing at a remarkable pace in terms of their reach and
the credit provided to the people. The major catalyst for the growth of
pawnshops have been the minimal transaction costs on the part of
borrower, easy and quick availability of loan and higher accessibility of
pawnshops even under the remote areas of the country.
The loan disbursed in 2015 augmented to PHP ~ billion on the account of
advent of online pawning in the country which is a new advancement.
Lack of credit facilities, lower credit card penetration and incomplete
credit histories has prompted the borrowers to resort to the pawnshops
since they require just a valid identity proof and collateral to provide the
credit. Pawnshops generally lend money to the customer against some
articles been put in place of equal or higher value. The credit is offered on
an estimated market value of the asset and the item is kept until the
principal loan and interest amount is paid back.
The number of pawnshops in the Philippines was registered at ~ as of
December 2015. The lower income class and the middle income class of
the Filipino society are primarily served by the pawnshops for their
remittance and easy credit requirements since this population cluster
constitute the unbanked members of the population. As of September
2015, ~ financial institutions were regulated by the central bank. The
number of pawnshops augmented at a CAGR of ~% from ~ in 2010. The
broader reach of pawnshops has been fundamentally attributed to the
ease of establishment. In contrast to a bank, a pawnshop requires limited
space, fewer staff, and requires much less capital, where it is mandatory
for each pawnshop branch to have a capital of just PHP ~, as stated by BSP.
Out of the ~ pawnshops in 2015, around ~ also provide certain auxiliary
services such as remittances facilitation, money changing, and bills
pay e t fa ilitatio . Additio ally so e pa shops also ser e as ash i -
ash out e ters a d pro ide o ile a ki g ser i es. There ere ~ head offices and ~ branches or agencies of pawnshops as on December 2015.
Although customers can pawn anything of value, however the general items
accepted by pawnshops differ among different pawnshops. It has been
observed that as of 2015, jewellery (especially gold or gold plated) stood
as the most pawned item in the pawnshops. This is majorly due to the fact
that jewellery is usually the most valuable thing that a person owns and it
is always fashionable. Moreover jewellery generally has a sentimental
value attached to it. Jewellery holds around ~% share in the total pawned
items as per 2015. Cebuana Lhuillier is the largest pawnshop in the
pawning segment of their business in 2015, accounting for a market share
of ~% in the pawning segment with a loan disbursement of PHP ~ billion.
Cebuana has the largest chain of pawnshops in the country with above ~
pawnshops recorded as of 2015. Cebuana Lhuillier pawnshop advertises
their brand as a caring non banking financial institution with Tri media
campaigns. The direct competitor of Cebuana Lhuillier is M Lhuillier with a
share of ~% in the market pie.
In-country Filipinos characterized by domestic migrants who have moved for
better economic and employment opportunities and permanent residents
together accounted for approximately 80% of the total domestic
remittances. Additionally, approximately 20% of the overall domestic
remittances were funded by people/families who have also received
international remittances from Filipinos in other countries. Domestic
remittances have been transferred from 143 cities inside 78 provinces of
the Philippines. The top 10 cities amongst these provinces included
Quezon City, Manila, Makati, Caloocan, Paranaque, Pasig, Mandaluyong,
Taguig, Pasay and Baguio. Continued expansion of the Philippine economy
and the generation of local income have contributed greatly to the
distribution of wealth countrywide. The increase in local migration over
the years has been favorable to the growth of domestic money transfers.
The total market for domestic remittances was valued at PHP ~ billion in
2015 out of which PHP ~ billion was catered by the pawnshops which
witnessed expansion from PHP ~ billion in the year 2010.
Comparing to other financial institutions, pawnshops outnumbered savings
and loans associations, universal and commercial banks, and rural banks.
Palawan Pawnshop, Cebuana Lhuillier, M Lhuillier and RD Pawnshop are
some of the largest pawnshop businesses in the Philippines, offering a
variety of money transfer services. The aforementioned players, coupled
with other smaller pawnshops spread across the geography of the
Philippines, constituted the largest share in the Philippines domestic
remittance market since, the people generally need a bank account to
transfer via banks. It has been estimated that only ~ out of 10 adult
Filipinos had their own accounts with the banks. It has been scrutinized
that number of remittance transactions has been growing at a rapid rate
especially through the pawnshops and have reached close to the pawning
transactions and even surpassed pawning for some pawnshops.
With the rising penetration of internet in Philippines, the country has
observed a new trend for online pawning. The country saw the launch of
its first online pawnshop named PawnHero in 2015 in partnership with
2GO. The internet penetration in the country has increased at a startling
rate from ~% in 2009 to ~% in 2015. This increase in internet penetration
is expected to provide an impetus to the online pawning in the country. In
a study conducted by the PawnHero themselves, it was established that ~
% feel safe with 2GO picking up their items. PawnHero charges the
minimum interest rate of 2.99% which is levied flat on all the months and
customers can even pawn their articles for upto an year without visiting
the pawnshop many times unlike the traditional pawnshops.PawnHero
has factually turned all the available internet and mobile phone
connections into a pawnshop which means millions of centres for the
PawnHero combined with 900 2GO outlets.Thus, within a shorter time
span, PawnHero have extended their reach to the whole country.
In Philippines, monthly utilization of a payment service provider was majorly
frequent in order to send or receive money. Payment of bills through a
formal payment service provider in the Philippines has largely witnessed
confinement to urban areas and seldom takes place in the rural areas,
although a portion of the population also uses informal methods, such as
friends and family, to make bill payments. A majority of the transactions of
bill payments with payment centers such as Bayad take place in the urban
areas. On the other hand, the use of informal service providers has been
largely observed in both semi-urban and rural areas. Moreover, kiosks
have gained high acceptance amongst Filipinos. The kiosk use computer
software to process bill payment transactions. The inception of such a
system for bill payments has been beneficial especially for the unbaked
population of the Philippines.
The unbanked Filipinos also use pawnshops for paying various kinds of bills.
Although till now pawnshops are not much preferred for payment of bills,
however the ubiquity of pawnshops will make certain the growth of bill
payment services through pawnshops. The average transaction fee paid by
the Filipinos for making bill payments has ranged between ~ pesos to ~
pesos at the pawnshops. It has been observed that in 2015, around ~% of
the bill payment transactions done at the pawnshops were for paying
cellular phone or landline bills. This is due to large number of cellular
phone users in the country. It has been recorded that in 2015 the cellular
subscriptions in the country was more than ~ million.
• Insurance
Insurance through pawnshops has been a newer segment for the pawnshops
and yet at its nascent stage. The pawnshops have been providing low cost
insurance services ranging from just PHP ~ to PHP ~. The insurances
provided by the pawnshops usually come in the combination of different
kinds of services such as accident, death, burial assistance and others.
These policies vary from ~ to ~ months.
Lack of banking offices in several regions in Philippines has led to the
emergence and growth of other financial service providers (FSPs) such as
pawnshops. These entities have greatly helped to increase the access to
financial services in un-served and underserved regions in the Philippines.
A higher number of people have sought to make use of a broad
assortment of services offered by pawnshops such as credit, money
transfer, money changing and several others. In 2015, ~% of the total
municipalities had access to other financial service providers such as
MTOs and Pawnshops. The unemployment rate in Philippines has
consistently remained above ~% during the last few years. The
unemployed individuals usually have basic requirements such as feeding
their family, taking care of the educational expenses of their children such
as tuition fees, uniforms and other school supplies. The most common and
the quickest solution for such people is taking credit from pawnshops by
pawning their personal items. Pawnshops can address their urgent need
for even small amounts of cash.
With the rising penetration of internet in Philippines, the country has
observed a new trend for online pawning. The country saw the launch of
its first online pawnshop named PawnHero in 2015 in partnership with
2GO. The internet penetration in the country has increased at a startling
rate from ~% in 2009 to ~% in 2015. Banks generally are reluctant to
provide loans to the LGUs due to their poor credit worthiness which arises
from the incomplete information that they have about their own financial
operations, lack of predictable and secure asset- revenue base and several
other reasons. Similarly, the banks are also much disinclined to provide
credit to the middle and low class population mainly due to lack of the
proper credit history or lack of any documentation for facilitating the
credit provision. This is the reason they turn to the pawnshops for their
credit need which charge a higher interest rate, though skipping the
requirement for most of the documentation.
The main reasons for the growth of pawnshops have been the poor
functioning and reach of the banks, minimal transaction costs on the part
of borrower, easy and quick availability of loan and wide reach of
pawnshops in even the remote areas of the country. The loan disbursed
from the pawnshops has increased from PHP ~ billion in 2010 to PHP ~
Billion in 2015. The pawning market has grown at a CAGR of ~% through
the review period. The pawning market in the Philippines is projected to
witness revenue worth PHP ~ billion by 2020, augmenting at a CAGR of ~%
during 2016-2020. Service sector has contributed around ~% to the GDP of
the country in 2015. Surge in the service sector of the country will also
lead to increase in requirements of short term cash by service class and
middle class families.
Continued growth in internal migration is expected to sustain the growth of
money transfers taking place in the Philippines. The Philippines has
outshined India in terms of voice-based outsourced projects and has
become the worldwide leader in the call center industry. Over the past six
years, the BPO industry in the country has augmented at an average rate
of ~%, surpassing the global ~% growth rate. The sector is expected to
reach USD ~ billion in revenue with around ~million employees were
working in BPO sector. With the presence a strong ICT-BPO industry, the
numbers of people employed in this sector are expected to increase
considerably in the coming years. This will directly translate into a higher
demand for domestic remittance services as more people are expected to
migrate to urban areas, particularly Metro Manila, to seek employment,
improved career prospects and a better livelihood.
• Source: https://www.kenresearch.com/banking-financial-
services-and-insurance/financial-services/philippines-
pawnshops-market-research-report/8884-93.html
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Ken Research
Ankur Gupta, Head Marketing & Communications
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