Monday, September 20, 2021

Pawn Shops: Where one man’s trash becomes another’s treasure

On a given day if you walk into a pawnshop you can be sure to find almost anything — from gold necklaces to a ladder, and most notably vehicles in case such a visit is made to a local pawn broker store. 

The regulator of the pawnshop businesses in Botswana, the Non-Banking Financial Institutions Regulatory Authority (NBFIRA) says the business of pawning is not a new phenomenon but has been in practice for centuries.

“The history of pawnshop business in Botswana, unfortunately, has not been extensively documented but it is a common business practice that has been in existence for several years”, reads part of a research report compiled by NBFIRA and published recently. 

Given the observation made by NBFIRA on pawnshops business relating to its popularity, it is easy to assume that there are few pawnshops in Botswana. It is also wrong to do so. But what does the official data says about pawnshops business in the country? 

The most recent NBFIRA research report shows that from the year 2017 to 2020, the number of new entrants in the pawn industry in Botswana has been increasing at a diminishing rate. 

The data contained in the NBFIRA report shows that exempted pawnshops in Botswana increased from 13 to 87 between the years 2014 and 2020. This reflects a six fold (615%) growth with the most significant increases noted in 2015 and 2016 as the numbers grew by 14 and 30, respectively.

By the end of 2020, there were 93 exempted pawnshops in the country with most of them concentrated in urban and peri-urban areas. A further geographical location breakdown shows that 56 percent of the pawnshops are in Gaborone while 13 percent are in Francistown.

A further analysis of the NBFIRA data with focus on financial performance of the pawnshops business notably pegs the loan book value at P14.69 million at as December 2019. The 2019 loan book value reflected is for only 15 pawnshops businesses which had submitted data to the industry regulator for that reporting period. NBFIRA says based on the 2019 financial performance of the 15 unnamed pawn brokers, the total industry loan book value could be higher as more data is yet to be collected. 

The financial performance of pawnshops is measured by the loan book values (accounts receivables), that is; the total of all outstanding loans in the company books at the end of a given reporting period. 

The NBFIRA Act, 2016 defines a pawnshop as “a person licensed to engage in the business of lending money on personal property that is physically delivered to him or her as a security for loan transaction or lending money upon goods, wares or merchandise pledged, stored or deposited as security or engages in the business of purchasing tangible personal property to be left in pawn, on condition that it may be redeemed by the seller for a fixed price within a fixed period of time’’.

NBFIRA says the pawnshop business is a major contributor towards the financial inclusion agenda in Botswana as loans are granted to borrowers who can pledge collateral in the form of moveable property, in exchange for the loans.

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