As household debt balloons and living costs rise, pawn shops continue to act as a last resort for cash. Easy Money, Thailand's largest private pawn shop operator, has booked a 20% increase in customers in recent months.
Car loans are a major reason for pawn shops’ popularity, says Mr Sittiwit. APICHIT JINAKUL
"Most of them need cash for loan payments due to the higher cost of living and household debt," managing director Sittiwit Tangthanakiat told the Bangkok Post.
One of the major causes of debt is automobile loans for those participating in the government's first-time car buyer scheme that ended last December.
Mortgages, credit card bills and personal loans are also adding to pawn shop customers.
"We have a client base of more than 300,000, mixed between white- and blue-collar workers. Customers in both segments have increased by about 20% from July. First-time car buyers are expected to redeem their pawned assets after receiving the tax refund from the government," said Mr Sittiwit.
Flooding and the country's gloomy economy are other factors driving the pawn industry.
Small and medium-sized business owners have brought in higher-value assets to pawn, as they need working capital to keep afloat, he said.
The interest rate at Easy Money is 2% per month for principal of 2,000 baht or less and 1.25% per month for more than 2,000 baht with a pawn period of five months. The unredeemed ratio is low at 4% of total pawned assets.
Easy Money, a brand subsidiary of Tangthanasin Ltd, has 90% of pawned assets in gold and jewellery.
The pawn shop was severely affected by the plunge in gold prices from April-June despite hedging the commodity. As a result, the company expects to miss its net profit target by 50% this year.
The company plans to expand next year with two more branches in Udon Thani. It has 27 branches in the country, although none in the South.
Easy Money sees business potential in the southern provinces, but expansion there is not a priority due to the strong liquidity among the people there compared with other regions.
On average, a branch opening requires a budget of 40-50 million baht, said Mr Sittiwit.
The company normally uses a 50-50 split of its own capital and bank credit. It plans to secure bank loans worth 1.5 to 2 billion baht for business expansion next year, he said.
Easy Money has more than doubled from 12 outlets last year and posted annual growth of 50-60% in pawned asset value since opening in 2005.