Pawnshops are raking it in

LIMOUSINES roll up to the plate glass storefront in Makati, unloading heirloom jewelry, paintings, and recently even a chamber for divers with the Bends.

Turnover was up 50 percent in January and business has never been better for J. Michael Dizon, lender of last resort to the well-heeled.

“I’ve had some weird things brought to me,” said the amiable 41-year-old manager, sitting on the low sofa of a spare, air-conditioned reception room that looks more like an art gallery than a pawnshop.

Pin lights highlight a German cuckoo clock and a wall of unredeemed 1970s Filipino paintings.

“Yesterday a doctor brought me a hyperbaric oxygen chamber. I had to turn him away because he would lose his ability to earn money,” said Dizon, referring to the therapy for divers stricken with the decompression illness.

Earlier, he said, he had lent money to a businessman who put up as collateral fog-making equipment for stage sets.

In Europe, pawnshops have financed wars and voyages of discovery, but in the Philippines they are mostly associated with the poor, with lenders usually dealing with their customers through barred shop windows in down-and-out neighborhoods.

The central bank says there are more than 14,000 pawnshops across the Philippines, with the industry, which began in the mid-19th century, dominated by the Tambunting and Lhuillier families.

The industry lends about P10 billion a year, mainly accepting jewelry, but in recent years also television sets, mobile phones, digital cameras and motorcycles.

Pawnshops lend at credit-card rates for small loans of up to three months.

Borrowed money “is used for consumption needs such as for payment of tuition fees, medical emergencies and to defray costs of celebrations like town festivals, birthdays and others,” said Fernando Caballa, head of a central bank division that monitors the industry.

Cheer Mae Ecarma, publicist for the Lhuillier group, says pawnshops are now just one segment of the group’s business, which includes delivering money remitted by the millions of Filipinos working abroad.

Caballa says it is “premature to say if the global financial crisis has affected the lending operations of pawnshops,” which he claims account for less than 0.25 percent of the Philippine economy.

Dizon, by contrast, says his Agencia de Empeños de Makati should become more prominent as the global credit crunch deepens.

“The reason our business is flourishing is because the banks are not lending,” he said, adding banks as a rule honored only land as collateral, and would not lend for less than the property’s appraised value.

His high-end clientele includes businessmen and women who hock assets to meet monthly payrolls for their staff as economic activity slows.

“It’s not because they are bankrupt. The main reason is cash flow and liquidity,” he said.

Many prefer to stay inside their cars. Uniformed staff serve them brewed coffee, pastries or whatever else takes their fancy.

Dizon recalls turning away a client who was trying to pawn a painting by 19th century master Juan Luna, the country’s most famous artist.

He said it would be difficult to dispose of such a costly investment, and the customer was politely referred to the Singapore office of Christie’s auction house.

Dizon says he has a remarkably low default rate of 3 percent, compared to the industry average of 49.3 percent, though he expects this to rise this year. Any unredeemed items are auctioned off.

“I told my staff that this year will be difficult for everyone,” he said.

Filipino pawnshops by law can accept anything of value that fits in their vaults—except guns.

Dizon says he also rejects Hermes or Louis Vuitton handbags because “the [local] market is very thin.” —  Cecil Morella, Agence France-Presse