Pawn shop business drops 40% on i-Sinar

Many people are redeeming their jewellery as they have enough cash in hand and following the upcoming Hari Raya festive season


LOCAL pawn shops see its business declining by 40% due to various cash aids, particularly the Employees Provident Fund’s (EPF) i-Sinar.

Malaysia Pawnbrokers Association president Tan Ho Keng said withdrawals under the scheme do not make the business any better as people have more cash in hand.

“With people now having more cash in hand, who will need to pawn off their jewellery? Instead, many people have been returning to pawn shops to redeem items they had previously pawned off.

“Once they redeem, our loan will decrease. Now, we are facing a 40% decrease in sales,” he told The Malaysian Reserve (TMR) in an interview recently.

According to the EPF, those with RM100,000 and below in Account 1 have access to any withdrawal amount of up to RM10,000, of which the payments will be staggered for six months with first payment of up to RM5,000.

Tan said contrary to people’s belief, since the first Movement Control Order was implemented last year, the pawn shop business has not been doing well.

“The majority of Malaysians are still able to get their salary, monthly. Then, the government gave cash incentives, but the people are not spending a lot and can’t even travel compared to pre Covid-19.

“From March last year, we had been facing the same problem, including lack of customers due to the restrictions on movement especially due to the ban on inter-district travel, previously,” he explained.

This has forced some pawn shops to be closed, especially those in small towns.

“People usually come to a pawnshop to get an ad-hoc money for emergency use, it is a faster way to get a loan.

“But now, many people will go buy gold. That’s why gold shops and goldsmiths are enjoying a good business at the moment,” he added.

TMR previously reported that a large number of people, who withdrew savings from their EPF Account 1 under the i-Sinar programme, is using the money for investment.

On the upcoming Hari Raya Aidilfitri, Tan said there is a trend of people redeeming their jewellery to wear during the festive season.

He foresees this year will also see the same trend. Moving forward, Tan said pawn-brokers can only fully recover when lesser Covid-19 cases are reported and with no movement restrictions.

“Perhaps, when the situation gets better, people can spend their money, go travel, (and) we might be able to recover.

“For now, we hope that the government would help tide the industry over by postponing the issuance of new pawnbroker licences until their situation recovers,” he added.

Meanwhile, Yayasan Pembangunan Ekonomi Islam Malaysia (YaPEIM) acting DG Parihah Hasan said the impact on i-Sinar withdrawals sees more customers coming to Ar Rahnu branches to redeem their pawned or mortgage items.

She said Ar Rahnu transactions in first quarter of 2021 (1Q21) recorded the same pattern with slight growth compared to the same period last year.

“For 1Q21, we achieved a slight increase in performance over 2020 for total disbursement.

“The growth was contributed by gold price stability and demand for financing from customers to accommodate their need for fast cash,” she told TMR.

Ar Rahnu YaPEIM Micro Credit programme mainly focuses on helping the targeted group to obtain instant cash through a collateral or pawning process.

The purpose of mortgages by customers varies according to their needs.

Around 46% pawn for productive purposes such as business or education, while the rest are for other purposes.

“In the holy month of fasting, as in previous years, many customers come to the branch to get financing for their business capital especially for Ramadhan and Hari Raya Aidilfitri business projects.

“But there are also those who make redemption of the mortgage in preparation to wear something during the celebration,” she added.

According to the Ar Rahnu YaPEIM database, only 6.35% of mortgage transactions are for survival needs, while the remaining 14% are to pay debts, medical purposes (12%), performing haj and umrah (7%) and the rest for other purposes.