week 14

• Pawnshop


  A store or form of business that lends money to consumers who carry valuable items to be pawned
• Collateral


  The precious asset that will only be returned from the pawnbroker after the loaned money and interest have been repaid
• Pawnshop loan process

  1. Borrower pledges valuable item

  2. Pawnbroker lends money

  3. Borrower fails to repay loan and interest within agreed time

  4. Pawnbroker sells the collateral to recoup the money loaned
• Pawnshops


  • Provide micro-lending facilities, a critical source of credit in many developed countries, especially in Asia
  • Offer loans to low-income families and minimum wage earners that might not have been available otherwise
  • Boost credit market competition by offering an alternate source of credit to those who have been denied bank loans
• Functions of Pawnshops

  • Collateral-based Loans
  • Retail Sales
  • Valuation Services
  • Financial Services
  • Security and Storage
  • Provide Convenience and Accessibility
• Pawnbroking can be traced back to ancient China

  At least 3,000 years ago
• Prominent families such as Lombards of England and the Medicis of Italy became known as money-lending families

  Middle Ages
• King Edward III famously pawned his jewels to Lombards to help finance war against France


  1388
• The Franciscans established the montes pietatis, providing low-income people with interest-free loans

  1462
• During the Spanish reign, Chinese traders would usually traverse Philippine waters to conduct business, and the act of pawning may have been passed on and taught to our ancestors
• Pawnshops have been popular in the Philippines due to their micro-lending services, which are essential in augmenting the financial capabilities of various individuals and families in need of quick cash
• Presidential Decree 114


  The purpose of this law is to regulate the establishment and operation of pawnshops in the Philippines
• Definitions

  • Pawnshop
  • Pawner
  • Pawnee
  • Pawn
  • Property
  • Pawn ticket
• Pawn ticket is the pawnbrokers' receipt for a pawn. It is neither security nor printed evidence of indebtedness.
• Pawn Ticket Contents

  • Name and residence of the pawner
  • Date when loan is granted
  • Amount of the principal loan
  • Interest rate in percent
  • Period of maturity
  • Description of the pawn
  • Signature of the pawnbroker or his authorized agent
  • Signature or thumb mark of the pawner or his authorized agent
  • Such other terms and conditions as may be agreed upon between the pawnbroker and the pawner
• Form of organization and Citizenship Requirement

  • Single proprietorship - only Filipino citizens may establish and own
  • Partnership - at least 70% of capital owned by Filipino citizens
  • Corporation - at least 70% of voting capital stock owned by Filipino citizens
• Registration and licensing


  1. Register with the Bureau of Commerce or Securities and Exchange Commission

  2. Secure a license from the appropriate city or municipality
• Any individual, corporation, or association duly registered and licensed to engage in the pawnshop business shall file an information sheet, under oath, with the Central Bank before commencement of actual operations
• Minimum paid-in capital


  One hundred thousand pesos (P100,000.00)
• Types of Pawnshop Licenses

  • TYPE A - Pawnshop business with not more than 10 offices (Single Proprietorship/Partnership)
  • TYPE B - Pawnshop business with more than 10 offices or with money changing/foreign exchange dealing (Corporation)
  • TYPE C - Pawnshop business with corollary remittance activity requiring Bangko Sentral registration, with or without money changing foreign exchange dealing (Corporation)
  • TYPE D - Virtual pawnshop operators or those engaged in pawnshop business through electronic pawning (Corporation)
• Loan amount

  Not less than 30% of the appraised value of the security offered for the loan unless the pawner manifests in writing the desire to borrow a lesser amount
• Redemption


  Fails to pay within maturity date of obligation: interest dues after maturity of obligation: sum of the principal of the obligation and interest earned at the time the obligation matured
• Disposition of pawn on default of pawner

  1. Redemption Period: within 90 days from the date of maturity of the obligation

  2. Fails to Redeem: pawnbroker may sell or otherwise dispose of any article taken or received by him in pawn

  3. Notification to pawner: such sale on or before the termination of the 90-day period, the notice particularly stating the date, hour, and place of sale
• Public Auction of Pawned Articles

  1. Location: Pawnbroker's place of business or another public place within the same municipality or city

  2. Auctioneer: Licensed auctioneer

  3. Notice: at least two daily newspapers printed in the city or municipality during the week preceding the date of such sale
• Qualities of a Trusted Pawnshop


  • The company must be officially registered
  • Business permits and certifications are displayed for the safety of clients
  • Consumers have good feedback about them and their services
  • Track record of successful transactions and collaborations with other firms
  • Has been acknowledged or honored for their services
• Advantages of Pawning

  • Instant Access to Cash
  • Easy and Fast Pawning Process
  • No Credit Checks
  • No effect on credit history
  • Safe transactions with licensed pawnshops
• Disadvantages of Pawning

  • High Pawn Loan Interest Rate
• Pawnshops


  • Quick loan approval, unlike government offices and banks
  • No credit checks or approval process, just agree on price and redemption date for collateral
  • No effect on credit history if you fail to pay back
• Pawnshops in the Philippines


  Regulated by the Bangko Sentral ng Pilipinas (BSP) to ensure fair, ethical, and legal money lending practices
• Online pawning


  Latest method for getting extra cash by pawning an item<|>Offers higher appraisals than brick-and-mortar pawnshops due to lower overhead costs<|>No need to leave home or office, saves time and effort<|>Tech-enabled transactions
• How pawnshops make money


  Providing personal loans and earning interest<|>Reselling retail items, including forfeited collateral<|>Offering auxiliary services like money transfer and cell phone activation
• Commonly pawned items


  • Jewelry
  • Designer bags
  • Watches
  • Electronics and gadgets
  • Musical instruments
• Buying jewelry from a pawnshop


  • Shop around and negotiate
  • Test the jewelry
  • Check the price
  • Read the policy
• What to look for when choosing a pawnshop

  • License to operate
  • Safe storage and insurance coverage
  • Quick and convenient transactions
  • Good reputations
  • Reasonable and competitive rates
• As of March 2024, 16,070 Pawnshops are supervised by BSP
• Trusted pawnshops in the Philippines


  • Cebuana Lhuillier
  • Palawan Pawnshop
  • Villarica Pawnshop
  • M Lhuillier
  • Tambunting Pawnshop
  • Pawnhero Pawnshop