Pawnshops Facing Cash Crunch

[george]

Pawnshops facing cash crunch

Higher oil prices, currency, interest rates put families under pressure

BANGKOK: -- A large number of people seeking loans from state-run pawnshops has plunged the Bangkok Metropolitan Administration into trouble, with the agency now grappling with a cash supply shortage. Deputy Bangkok governor Panich Vikitsreth said the BMA-run pawnshops were confronted with a cash flow problem as demand for loans had increased 20% on the same period last year.

In response, the BMA had injected another 10 million baht into 20 pawnshops around the capital and tightened regulations on granting loans.

''The BMA has allocated over 1.6 billion baht to the city pawnshops and the money is running out,'' said Mr Panich.

He said the number of pawnshop clients had increased as a result of rising loan interest rates, a stronger currency and soaring oil prices.

The BMA would also tighten conditions for granting loans.

''We are considering limiting the amount of cash granted to each customer to 50,000 baht a client, so we can lend money to a greater number of people,'' he said.

At the moment a client is allowed to have a maximum of 10 pawn tickets, but in the near future, the BMA would limit the number of pawn tickets to only one ticket a client.

Mr Panich said 80% of pawnshop customers used gold accessories as collateral for loans this year, due to the soaring gold price.

This had worsened the financial status of the BMA's pawnshops, which had to pay a higher amount of money, he said.

Pawnshop customers could earn up to 10,000 baht per one-baht weight of gold, or 4,000 baht more than last year's rate.

Each year, around 400,000 people seek loans from the BMA-run pawnshops, which offer cheaper interest rates than private pawnshops.

The number of clients is increasing ahead of schools opening this month as parents look for cash to pay for school uniforms and textbooks.

The BMA-run pawnshops now offer a special monthly interest rate of 2% for parents needing cash during the school year.

They must show evidence that they have children studying in school.

Some private schools opened last week and this week all private and public schools will begin the new term.

According to the Kasikorn Research Centre, education costs are a major burden for most families.

The survey of 1,451 people last month found that the oil price hike had cut average family purchasing power. The problem forced them to buy fewer student uniforms for their children, from four to two pieces.

According to the survey, families spent over 40% of their income on education fees, 15% on writing accessories and another 15% for student uniforms. The value of uniforms traded in this year would come to 3.5 billion baht.

Although the BMA had launched a soft loan package last month to help parents shoulder rising expenses, many people would have to seek loans from pawnshops as the scheme could help only 400 families, said the deputy governor in charge of financial administration.

Meanwhile, the manager of a private pawnshop in Klong Toey district said the number of clients had increased 12% in recent months.

''Around 70% of my customers are the same old clients. But this year, the situation is worse as I have noticed everyone complaining about tougher financial times.

''All I can do is suggest they adhere to His Majesty the King's sufficient economy principle,'' said the manager.

He added the increase in pawnshop clients was a sign that the country was heading toward an economic downturn.

--Bangkok Post 2006-05-14

[Heng]

Just whinging (from the gov't) for more funding, when in reality it's a totally self sufficient business (a rarity for government) which is essentially recession proof. In private pawn shops, when you reach your reserve level -just like any bank-, that's it, you don't continue lending to everyone.

They should auction the rest of those pawnshop licenses already.

[LaoPo]

Just whinging (from the gov't) for more funding, when in reality it's a totally self sufficient business (a rarity for government) which is essentially recession proof. In private pawn shops, when you reach your reserve level -just like any bank-, that's it, you don't continue lending to everyone.

They should auction the rest of those pawnshop licenses already.

I'm sure you would be interested, Heng....am I wrong?

LaoPo

[Heng]

Sure, but probably wouldn't be able to afford it.

[~G~]

Sure, but probably wouldn't be able to afford it.

common' Heng. Sell a few empty rais and you're there (or is it against policy/tradition? )

Edited May 16, 2006 by ~G~

[Heng]

Actually just the gold dust settled on the family jewels should be more than plenty, G.

[~G~]

Actually just the gold dust settled on the family jewels should be more than plenty, G.

Glad to hear that Heng. The Holy land is safe and sound then.