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Pawnshop Theoretical Background

 Pawnshop Theoretical Background Composition

Theoretical Background

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Pawnshops offer financial services known as micro-lending which is an essential source of credit in many producing countries, specially in Asia. Pawnshops can provide these types of financial services to poor and low-income homes for a various reasons. Is that pawnshops fall under significantly less regulation than any other financial institutions. Pawnshops used to operate like a sari-sari store with very little govt control. In fact the only period these models came into exposure to government agencies was when they paid business subscription fees and income taxes. They were not even covered by the usury law enacted in 1916. (Mario Lamberte – 1988) Another reason pawnshops can provide these financial services to poor and low-income homeowners is that all their loans happen to be backed by hard assets which will lowers the transaction expense to the debtor and the lender and gets rid of the need to assess the borrower's creditworthiness. With time the pawn item has changed. In the past, for instance , Mario Lamberte noted (1988) that " pawnshops have preferred lees bulky products high-value things like jewelry. While using advent of even more competition pawnshops have enhanced the type of products they accept as collateral” (page 14). This transform continues today with the popularity of computer systems, cell phones and also other electronic devices as collateral. As a result of efficiency of pawnshop functions, they have been been shown to be a profitable business. A report for the Philippine Company for Advancement indicates that efficient administration of pawnshops allows 25% of the gross operating salary to movement to the final conclusion as net profits (Lamberte, 1988). It happened in 1999, there was a single (1) pawnshop for every almost 8, 756 people in the country now in the Philippines there are much more than 10, 500 registered pawnshops and five, 000 pawnshop owners relating to BSP that is up close to 3000 Pawnshop in 2000. This figure far exceeds the quantity of banks and bank...

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