...2012-2013 PAWNSHOPS AND BEHAVIORAL ECONOMICS 193 PAWNSHOPS, BEHAVIORAL ECONOMICS, AND SELF-REGULATION SUSAN PAYNE CARTER* AND PAIGE MARTA SKIBA** I. Introduction Pawnbroking is the oldest source of credit.1 There is growing public interest in day-to-day pawnbroking operations, as evidenced by the popularity of reality shows such as “Pawn Stars” and “Hardcore Pawn.”2 Television viewers’ curiosity about an old credit institution may be due to the fact that 7% of all U.S. households have used pawn credit.3 Although pawnshops predate biblical times, researchers know surprisingly little about this ancient form of banking and its customers.4 We fill this gap by documenting detailed information on pawnshop loan repayment and default, and by discussing how pawnshop borrowers’ behavior is consistent with various behavioral economics phenomena. Pawnshop loans are small, short-term, collateralized loans typically used by low-income consumers. The borrower leaves a possession, or “pledge,” as collateral in exchange for a loan, typically of $75–$100.5 Interest rates vary by state and range from 2 Assistant Professor, Office of Economic and Manpower Analysis, United States Military Academy. susan.carter@usma.edu. The views expressed in this paper do not necessarily represent those of the United States Military Academy, the United States Army, or the Department of Defense. ** Associate Professor of Law, Vanderbilt University...
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...What is a pawnshop? The pawnshop, consist of many intriguing parts of the entrepreneurial spirit, finance, sales, and money. The main reason a pawn shop is in existence is for helping the people who could not otherwise find or secure a loan for their needs at the time. Banks will loan money, but people with collateral that is not substantial or credit that is poor stand little chance of getting a bank loan, or securing a small cash loan for their needs at the time, this is where a pawn shop comes into play, the shop will loan based on the item being used for collateral and the sum of money needed, generally the loan period will vary based on the state that regulates the pawn shop. The customer has the choice of either selling the item or securing the loan for a period with interest being paid for the amount of time used, if the customer decides not to pick up the loan, the shop will then sell the item for an amount based on a used marketable price. The pawn shops deal in a win-win of high finance, the loans being given are high risk at times therefore the usury rate on the loans are generally at high interest amounts. Once the collateral has been fore-fitted by the customer it becomes the property of the pawnshop to sell to recoup their loan back plus a profit on top of the lost interest and this creates the revenue stream from...
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...PHILIPPINE SCHOOL OF BUSINESS ADMINISTRATION, Q.C. 1029-Aurora Blvd. Cubao, Q.C. Selected Pawnshop Businesses along Sumulong Highway, Marikina City: Factors of Success Submitted by: Leira Susana Arceo Escala Charmaine Santos Tesalona Mariel Navata Nieto John Michael Temporal Soria Ralf Louise Sauro Vico Submitted to: Dr. Carolina D. Ditan Table of Contents Title Page Acknowledgement List of Tables List of figures Chapter I Introduction Background of the study Theoretical Framework Research Paradigm Statement of the Problem Hypotheses of the Study Significance of the Study Scope and Delimitations Definition of Terms Chapter II Review of Related Literature Foreign Literature and Studies Local Literature and Studies Chapter III Research Methodology Research Design Sampling Design Research Instrument Data Gathering Procedure Statistical Treatment Chapter IV Presentation, Interpretation and Analysis of Data Chapter V Conclusion and Recommendations Summary Conclusion Recommendation Bibliography Appendix Appendix I. Letter to the respondents Appendix II-A. Questionnaire for customers Appendix II-B. Questionnaire for employee/staff ...
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...By 1812 AD there were at least 20, 000 pawnshops in China. In the 1970’s, the Chairman Mao and his Red Army eliminated all the pawnshops along with other private enterprises. Recently, pawnshops started making a comeback, filling the gap in their national banking system, lending money to people who earn enough to have bank accounts. Pawnshops were so respected by the Chinese population that they named, Kwan Tai, one of their Gods, the “Patron God of Pawnshops”. The word “Pawn” comes from the word “PATINUM” which means cloth or clothing. During the early centuries, in Europe, when people borrowed money, the collateral they used was their clothes. Pawn broking was in existence in the ancient Roman and Grecian civilizations. The first formal pawnshop businesses were in China. They originated in Buddhist monasteries, where the interest was usually at 3% or less. Pawn broking is one of the oldest credit means in the Philippines. Many people believed that the Spanish friars have introduced it when Philippines was stilled ruled by the Spaniards. For many Filipinos, pawning jewelry at a neighborhood pawnshop has been most common and quickest way to address an urgent need for relatively small amounts of cash. Filipinos patronize pawnshops as one of the alternative source of credit and with the increasing numbers of pawners people should be aware of the pawn broking transactions, auction sale and some pertinent information that will reduce the risk of pawning and buying of unredeemed...
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...Table 1 Running Time of the Pawnshop N=20 | FREQUENCY | PERCENTAGE | 16 years and up | 7 | 35 | 1-4 years | 5 | 25 | 10-15 years | 4 | 20 | 5-9 years | 3 | 15 | Missing | 1 | 5 | TOTAL | 20 | 100% | Table 2 Choice of Running a Pawnshop Business N=20 | FREQUENCY | PERCENTAGE | Family Business | 7 | 35 | Own Choice | 5 | 25 | Challenging and Crucial | 1 | 5 | Only Employed | 7 | 35 | TOTAL | 20 | 100% | Table 3 Store Hours N=20 | FREQUENCY | PERCENTAGE | M-Sat | 13 | 65 | M-F-Sat, Sun | 7 | 35 | TOTAL | 20 | 100% | Table 4 Capital N=20 | FREQUENCY | PERCENTAGE | 1M and above | 11 | 55 | 100-499k | 5 | 25 | 800-1M | 1 | 5 | Missing | 3 | 15 | TOTAL | 20 | 100% | Table 5 Edge from All Other Pawnshop Businesses N=20 | FREQUENCY | PERCENTAGE | Low Interest | 15 | 21.74 | High Appraisal Rate | 15 | 21.74 | Remittance | 12 | 17.39 | Established Name | 10 | 14.49 | Quick Cash Loans | 8 | 11.59 | Charge Rates | 7 | 10.15 | Special/Dried Products | 1 | 1.45 | No Advance Interest | 1 | 1.45 | TOTAL | 69 | 100% | *69 ang total kay they may check several man… Table 6 Accepted for Pawning N=20 | FREQUENCY | PERCENTAGE | Gold Jewelries | 20 | 28.17 | White Gold Jewelries | 16 | 22.53 | Appliances | 9 | 12.68 | Platinum | 9 | 12.68 | Gadgets | 9 | 12.68 | Silver | 7 | 9.86 | Motor | 1 | 1.40 | TOTAL | 71 | 100% | *71 ang total kay they may check several man… Table 7 How to Determine...
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...factors that affect the success Of two selected pawnshops in metro manila: an assessment A Thesis Proposal Presented to The Faculty of the Business Administration, University of the East – Manila In Partial Fulfillment for the Degree of Bachelor of Science in Business Administration Major in Financial Management Submitted by Juatco, Martian Lanz Gary A. Mingaracal, Alvin M. Pediengco, Alelie Krizza D. Perey, Christine Mae R. Summer S.Y. 2014- 2015 CHAPTER I The Problem and Its Background Introduction Pawnshops are in the business of lending money on the security of pledged goods left in pawn, or in the business of purchasing tangible personal property to be left in pawn on the condition that it may be redeemed or repurchased by the seller for a fixed price within a fixed period of time. A "pawn transaction" does not include the pledge to, or the purchase by, a pawnbroker of real or personal property from a customer followed by the sale or the leasing of that property back to the customer in the same or a related transaction (definitions.uslegal). State and local laws regulate pawnshops. Pawnshops may be required to be licensed and regulations often require certain standards of record keeping and pawnshop fees charges to be followed. Regulations may require a minimum age of persons seeking to pawn items and may prevent the offering of insurance for pawned items. Pawnshops may also be required to consult police reports...
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...Introduction It is said that Pawnbroking is the oldest source of credit. (Caskey, 1994) Pawnshop loans are small, short-term, collateralized loans typically used by low-income consumers. Despite their small principal, however, pawnshop loans are an important tool that many customers use to manage their monthly finances during financial shortfalls. (Carter and Skiba, 2012) In the Philippines, Pawnshop is one of the financial service providers (FSP) that are helping to increase the access to financial services of underserved and unserved. For many Filipinos, pawning is the most convenient way to raise money, easier than securing a bank loan. In the Bangko Sentral ng Pilipinas Report on the State of the Financial Inclusion in the Philippines in 2011, the Banking sector is accounted for more than 80 percent of the total resources of the financial system. This means that the 20 percent are shared by other service providers such as pawnshops, money changers, remittance agents and FX dealers. Some municipalities in the Philippines have no banking presence but have access to pawnshops. While pawnbroking is the main business activity of pawnshops, nowadays many pawnshops are engaging into other auxiliary businesses such as money changing, remittance facilitation, foreign exchange dealership, and bills payment facilitation. Moreover, few pawnshops are offering cash in-cash out centers and offer mobile banking services. Financial economists have produced a large number of theoretical...
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...CHAPTER 1 THE PROBLEM AND ITS BACKGROUND Introduction Pawnshops have been around in one form or another for the past 3,000 years. They offer services similar to those of modern banking institutions including loans, consignments, and storage. A good pawn broker buys items for a reasonable price and sells them at a discount. The pawn industry is about making money, and that means repeat business and reasonable dealings. A good pawnshop will carry a variety of items including jewelry, tools, antiques, furniture, knives, guns, crossbows, camping gear, and everything and anything you could imagine being of value and sellable. Some pawn shops even buy and sell cars, motorcycles, and aircraft. In the Philippines Pawnshop Operation is guided/ covered by Presidential Decree No. 114 Sec. 1-2 as: This decree may be cited as the Pawnshop Regulation Act, which stipulated according to that: “ It is hereby declared the policy of the State to regulate the establishment of pawnshops and to place their operation on a sound and stable basis to derive the optimum advantages from them as an additional source of credit; to prevent and mitigate, as far as practicable, practices prejudicial to public interest; and to lay down the minimum requirements and standards under which they may be established and do business...” The word "pawn" comes from the Latin word "pignus," which means to pledge. When someone has an item of worth on which they would like to receive a monetary loan, they take that...
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...meet the different needs of all strata in the economy by expanding the financial base of society and preventing financial exclusion. Therefore, informal credit institutions such as pawnshops are recognized as providing loans to those in society that are excluded from mainstream bank loans. Operating side-by-side with the mainstream financial sector, but largely ignored, the pawnshops as part of the informal sector are significant in providing credit finance, particularly to low-income groups and in areas where mainstream institutions are hampered by bureaucracy (Chan and Owyong, 2007). In the context of development, Caskey (1994) emphasizes the importance of pawnshops as „banks for the poor‟. He elaborates that pawnshops have a high outreach, are often financially viable, and have several advantages; compared to other informal market institutions, clients are not expected to fall into long-term indebtedness. Moreover, it reduces the risk of a pawnbroker to provide loans to poor people, and monitoring is not necessary. Although pawnshops have grown in importance and influence part of the population in various societies, there is still a lack of research regarding these important informal credit institutions. In other words, despite the flourishing business, the theoretical and empirical studies of pawnshops are very limited. The following studies are some of the earlier studies in the U. S. among the little available literature: Patterson (1899a and 1899b), as a comparative study,...
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... THESIS ABSTRACT Title : THE PAWNSHOP INDUSTRY IN METRO LEGAZPI Author : SURATOS, EMMA A. Degree : ? Year : 2000 Location : AQ This study looked into the pawnshop industry in Metro Legazpi in order to recommend measures to improve its operations. Specifically, it answered the following questions: 1. What is the profile of pawnshop industry in Metro Legazpi? 2. What is the current state of operation of the pawnshop industry in Metro Legazpi? 3. What are the problems encountered by the owners/operators and the consequent solutions offered to address them? Scope and Coverage The study is concentrated on the operations of all the 26 pawnshops fully operating in Metro Legazpi. By counting the head office and branches as one, the 26 offices were consolidated into 12. Three new pawnshops that have complied with the requirements but are still waiting for their registration certificates brought the total respondents to fifteen. Registered pawnshops in province of Albay but located outside Metro Legazpi were not included in the list of respondents. Financial condition, management practices, and the clients' perspective were likewise not considered in the study. Sources of Data The primary source of data was the information generated through the survey questionnaires distributed to the owners and staff of the different pawnshops in Metro Legazpi. The secondary source of data came from the files and records...
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...A Feasibility Study of Establishing a Pawnshop in General Santos City CHAPTER I INTRODUCTION This chapter discusses about the background of the study, rationale of the study, objectives of the study, significance of the study and definition of terms. Background of the Study Too many people are in difficulty today due to economic or unstable economy people may find an alternative way to find a solution to their problems, many of them go to the houses of the creditors owing money to be able to meet their needs even in a small amount, but sometimes they cannot borrow money because they have not paid their first loan. So, people will go to other areas to take instant cash. Some will apply a bank loan, and wait for an answer only to be able told that they are denied. That’s why people will go to their local pawnshop for much need help. Pawnshop brokers are seeing people from all walks of life pawning everything that has value that will put the cash they desperately need in their hands when they need it. (www.business.whatitcosts.com) 1 1 Pawnshop is a store which offers loans in exchange for personal property as equivalent collateral if the loan is repaid in the contractually agreed time frame, the collateral may be repurchased at its initial price plus interest. If the loan cannot be repaid on time, the collateral may be liquidated by the pawn shop through a pawnbroker or secondhand dealer through sales to customers. (http://www.businessdictionary.com) As a result...
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...needy should be the main focus in Islamic finance. In this context, the Islamic pawnshop (ar-rahnu scheme) is the most appropriate mechanism as it provides a financial product for the lower-income group and small businesses which usually have limited capital or have been excluded from the mainstream financial system. Prior studies have shown the importance of Islamic pawnshop to the Muslim societies1. Before the implementation of the Islamic pawnshop system, the conventional pawnshops had charged high interest rates on the loans given. The conventional pawnshops were more motivated on making profit from the needy individuals and this activity was only restricted by the laws in the Pawnbrokers Act 1972. The conventional pawnshops had indeed oppressed and put a burden on the lower-income group. The purpose of the Pawnbrokers Act 1972 was to guarantee a healthy pawnshop industry, as well as safeguarding the interests of the consumers. However, it failed to control the problems of the oppression of the lower income group and the pawnbrokers’ malpractices. In fact, it seemed to encourage the practice of usury, with high interest rates of 2 percent per month, or 24 percent per annum. The high interest rates make it difficult for the consumers to reclaim their goods or jewellery. As for those who need the loan as a business capital, they find that their capital is rapidly diminishing. The conventional pawnshop system is more likely to put a burden on the lower-income group and this is against...
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...2012-2013 PAWNSHOPS AND BEHAVIORAL ECONOMICS 193 PAWNSHOPS, BEHAVIORAL ECONOMICS, AND SELF-REGULATION SUSAN PAYNE CARTER* AND PAIGE MARTA SKIBA** I. Introduction Pawnbroking is the oldest source of credit.1 There is growing public interest in day-to-day pawnbroking operations, as evidenced by the popularity of reality shows such as “Pawn Stars” and “Hardcore Pawn.”2 Television viewers’ curiosity about an old credit institution may be due to the fact that 7% of all U.S. households have used pawn credit.3 Although pawnshops predate biblical times, researchers know surprisingly little about this ancient form of banking and its customers.4 We fill this gap by documenting detailed information on pawnshop loan repayment and default, and by discussing how pawnshop borrowers’ behavior is consistent with various behavioral economics phenomena. Pawnshop loans are small, short-term, collateralized loans typically used by low-income consumers. The borrower leaves a possession, or “pledge,” as collateral in exchange for a loan, typically of $75–$100.5 Interest rates vary by state and range from 2 Assistant Professor, Office of Economic and Manpower Analysis, United States Military Academy. susan.carter@usma.edu. The views expressed in this paper do not necessarily represent those of the United States Military Academy, the United States Army, or the Department of Defense. ** Associate Professor of Law, Vanderbilt University...
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...contracts can find ready applications and would not hinder the growth of corporate business in this country. Asset purchases can be made possible via murabahah and ai bai bithaman ajil financing.[1] For business expansion and start up, the al- ijarah, mudarabah and musyarakah products have good potential. But if someone needs cash to pay debts or settle a down payment, buy shares, house renovation or even to go on a vacation. The above instruments may not help us get the cash we want. A pawn broking operation is relatively straightforward. The borrower simply needs to place a pledge or security for the amount of debt needed. Rahnu is a means of providing short term financing to the public by pawning his/her jewellery to banks or pawnshops as a security. It is one of the microcredit and financial instruments for low income earners seeking financial assistance to meet their fast working capital needs. [2] The inclusion of syariah regulation in the banking system in 1983 has encouraged its implementation in other finance institutions such as insurance, trust unit and Islamic pawn broking (ar-rahnu). The main reason is to eliminate interest which was imposed by pawn brokers as payment from the cash being loaned. The effect can be seen by the emergence of two pawn broking systems in Malaysia, namely the conventional pawn broking system and the Islamic pawn broking system. Rahnu principle is mainly used for Islamic pawn broking services in Malaysia. Under rahnu,...
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...2 INTERNATIONAL CONFERENCE ON BUSINESS AND ECONOMIC RESEARCH (2 ICBER 2011) PROCEEDING nd nd A STUDY ON ISLAMIC PAWN BROKING AWARENESS AND FACTORS INFLUENCING THE SCHEME IN SUNGAI PETANI, KEDAH Santhi Appannan and Gaithry Doris Faculty of Business Management AIMST University Email: santhi_appannan@yahoo.com gaithry_doris@yahoo.com ABSTRACT This paper aims to identify the level of public awareness towards Islamic pawn broking Ar Rahnu Scheme and the main factors that influence the public to pursue Islamic pawn broking in Sungai Petani, Kedah. Questionnaires were used to collect the data and were analyzed via cross tabulation, mean score analysis and multiple regressions. The findings indicate Sungai Petani’s community is aware of the term Islamic pawn broking but the awareness is at a different level among the races. The majority of Chinese and Malays were aware of this scheme. However the Indians were not aware of the scheme. The findings also indicate that the majority of Islamic pawn broking consumers are in a lower income group, mainly from the private sector with an income of RM1000 and below. It is also found that the main factor influencing public to pursue Islamic pawn broking was its cheap cost of loan. The other factors that were tested were confidential, customer service, locality and income level. Keywords: Ar Rahnu Scheme, public awareness, cost of loan, confidential, customer service, locality and income level. 1459 2 INTERNATIONAL CONFERENCE...
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