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| Title | Pawnshops and Microlending: a Fresh Look is Needed |
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| Author | Fernando, N. |
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| Content Language | English (en) |
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| Document Type | Article |
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| Date Of Publication | 2003 |
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| Description | This brief article, directed toward microfinance theorists, encourages a re-evaluation of the utility of pawning as a source of microcredit in developing countries, especially in Asia. It makes a case for reconsidering the merits of pawning, which has generally been viewed as a desperate measure, and as something to be discouraged. It confronts several assumptions behind the negative assessment of pawnshops: for instance, the author asserts that pawnshops do not exploit the poor, but instead often offer better rates than other informal money lenders and at minimal transaction cost. Even poor households have pawnable assets. Moreover, cash obtained from pawning assets is not always used to cover emergency costs, but can be (and sometimes are) used to expand small businesses. The author briefly outlines attractive features of the pawning system and describes two different case studies in Indonesia and Sri Lanka, also briefly. The experience of pawning in Indonesia is described in positive terms, with a very low level of pawned goods (0.5%) being put up for auction, indicating that most clients were able to redeem their items. In Sri Lanka, on the other hand, bank branches offering pawn services were more regularly broken into by insurgents and robbers in the 1980s than were branches not offering such services, and insurance and security costs naturally rose. In making the case for a re-evaluation of the pawn system, the author raises interesting points. However, this article should be considered merely as a starting point. Its emphasis on the positive aspects of pawning tends to whitewash the more negative aspects, and it does not provide similar data from both case studies, preventing a direct comparison between the two differing experiences of pawning in Indonesia and Sri Lanka. |
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| Publisher | ADB |
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| Edition | Finance for the Poor |
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| Series ID | 200303 |
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| Keywords | PAWNSHOP, PAWNING, CREDIT |
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adb microfinance newsletter vol.4 no.1 (EN)
