Singapore's rising cost of living sees pawnshops thrive

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Singapore's pawnshop industry has seen phenomenal growth at a time when rising prices and a slowing economy are putting pressure on the household budgets of middle- and lower-income families.

Loans surged to S$7.1 billion in 2012, up 43 per cent on-year, according to industry registry data.

Singapore has one of the highest concentrations of millionaires relative to its population, but the city-state's per capita income of more than S$65,000 in 2012 masks a sharp income gap between the richest and poorest.

SHORT-TERM LOANS

The three major pawnshop chains – which make up the bulk of the nearly 200 pawnshops across the island nation of 5.3 million people – have sought to take the shame out of using personal property as collateral for short-term loans.

"You look around you, this is probably one of the most expensive places in the world," said Derek Da Cunha, a local socio-political observer.

"Without the stigma (of borrowing), pawnshops have become more respectable and we have working professionals using it as a means to get short-term loans to cope with their expenses."

Families in the bottom 10 per cent of Singapore households had to weather a 1.2-per-cent dip in income adjusted for inflation last year, statistics department data showed.

Healthcare costs rose 3.9 per cent on-year in 2012 according to government data.

A consumer group said the average price of a bowl of noodles with fishballs, a staple dish, was 20 per cent higher in 2012 from a year ago at S$3.

Prices of basic food items such as rice, meat, vegetables and dairy products have also risen.

Some public-housing flats in choice areas now cost more than S$1 million, while car ownership also remains out of reach for many due to high taxes and a vehicle quota system.

A BETTER ALTERNATIVE?

People who pawn their goods have the items assessed by shop experts, and the loans the shops grant usually carry an interest rate of one per cent in the first month, then 1.5 per cent a month thereafter.

Items must be redeemed within six months or get forfeited, unless the borrower renegotiates a loan.

One borrower who declined to give her full name said pawning was a better alternative to seeking short-term loans from banks, which require paperwork and are not guaranteed to be approved quickly.

FIERCE COMPETITION

Valuemax and rivals Moneymax have thrived, both in fierce competition with the fast-growing Maxi-Cash, whose initial public offering in June last year raised S$16.8 million despite weak market conditions.

Grilled storefronts that used to be a mainstay in pawnshops have been replaced by outlets that boast uniformed staff members and resemble commercial bank branches.

But younger and more affluent customers, unperturbed by the stigma once associated with pawnshops, have also become an important clientele for an industry that has softened its image with endorsements from local celebrities.

Apart from gold, they also pawn diamonds, rare gems and antique watches.

CONCERN OVER GAMBLERS

Singapore's usually business-friendly authorities say they are closely watching the rapidly expanding industry, with some concerns that such accessible loans might help fuel gambling in the world's third-largest gaming market behind Macau and Las Vegas.

In April, the law ministry called for public feedback on a proposed amendment to laws governing pawnshops in order to strengthen governance of the industry.

Da Cunha does not believe the Government will impose any drastic measures.

"Pawnshops are already embedded in Singapore society. It is far better than the next alternative, which is for Singaporeans to seek loans from loansharks," he said.