SINGAPORE - The pandemic has upended many industries here so it's no great surprise to see plenty of upheaval in the staid corridors of the 100-year-old pawnbroking industry.
Customers have become markedly more risk-averse over the past two years and are taking out fewer loans, while the sector - Singapore's oldest form of lending - has had to embrace digitalisation and modernise its systems.
When Covid-19 hit early last year, Ms Yeah Lee Ching, executive director of pawnbroking chain ValueMax, told her team to be prepared with lots of cash to finance customers.
"We had anticipated that many more people would pawn their valuables in exchange for cash to tide them through the pandemic," she told The Straits Times.
Instead, ValueMax saw an increase in redemptions of pawned items such as branded watches and gold jewellery around the circuit breaker period last year - April, May, June and July - and for several weeks after.
It was the first time that the total number and value of redemptions had exceeded the number of goods deposited - known as pledges - for more than two consecutive months since the Registry of Pawnbrokers started collecting data in 1975.
The number of pledges redeemed hit a record 398,342 in June, with borrowers repaying pawnbrokers $543.5 million in loans, including interest, noted the registry. In comparison, pawnbrokers extended loans of $467 million against 323,549 pledges received over the same period.
Singapore Pawnbrokers' Association president Ivan Ho said: "People want to safeguard their assets and keep them as a store of value over holding cash when they are not optimistic about the future."
That has led to a fall in interest income for pawnbrokers like ValueMax. "As pawnbrokers, we play an important role providing instant financing to the market. It is a lucrative business for us," Ms Yeah said.
Pawnbrokers accept gold, jewellery, gemstones, watches and even luxury handbags as collateral and lend cash to pawners. Unlike banks, pawnshops do not require documentation such as proof of minimum income or employment and loans are instant.
Valuations are based on the second-hand market priced at "a slight discount, so that if customers default, we are able to resell the collateral in the second-hand market", Ms Yeah said.
Borrowers have six months to repay the loan plus interest, which is 1.5 per cent in the first month and 1 per cent a month for each subsequent month. At the end of six months, borrowers can redeem their pledges or extend the loan.
In the event of a default, the pawnshop takes possession of the collateral and auctions it off in the second-hand market.
While redemption numbers have stabilised, the financing business has fallen to levels last seen 10 years ago, according to the Registry of Pawnbrokers.
Mr Ho attributed this to the restricted market during the pandemic: "Many people who pawn their valuables for cash are foreigners like students, migrant workers and expatriates."
As long as borders stay closed and work permits are elusive, pawning activities will be subdued, he said.
Ms Yeah added that with fewer entertainment outlets and additional government handouts, people were able to save more and needed less short-term financing.
This spurred pawnbrokers to take their business online. "We have set up an online renewal system where customers can roll over and extend their loans online. They can pay interest online as well," said Ms Yeah.
Mr Ng Kean Seen, deputy chief executive of Maxi-Cash, noted: "Customers are now more digitally savvy so we have to connect more effectively with them online." The pawnbroking chain has developed a one-stop app for online valuations, instalment and interest payments as well as shopping.
Other trends have emerged. Over the past two years, sales of pre-owned valuables such as bags, watches and jewellery have surged online. These are pledges that have been surrendered by pawners and repolished to look brand new.
Ms Yeah added: "Pawners have surrendered jade and rubies from Myanmar and emeralds from Colombia to us, which are put up for sale. These are snapped up by bargain hunters for their beauty and value at a second-hand price."
Pawnshops are also a favourite for those looking to buy gold items at more affordable prices. With gold prices trending upwards, Mr Ng said the market for gold jewellery has grown dramatically in the past few years. "We are seeing more demand for pre-loved luxury products as consumers adopt more sustainable shopping habits."
Mr Ho said: "The recent changes in pawnbroking extend the industry's appeal to the younger generation. Technology has enabled us to align with modern lifestyles and make the second-hand market available to a wider audience at a time when many are actively managing their expenses."