Pandemic causes use of pawnshops to increase

Leiria Newspaper Edition April 29, 2021

Alternative At a time when the pandemic is weakening many families' budgets and banks are tending to restrict bank loans, pawnshops have emerged as an alternative, helping many households honor their debt obligations.

| Pawnbroking is a very old activity that has never stopped. But it has grown especially during this pandemic, not only because many families lack access to bank credit, but also because even physical presence at banks has become somewhat difficult due to COVID-19. This is the conviction of the president of the Brazilian Association of Lenders. In this scenario, observes Luís Valente, pawnshops have presented themselves as an alternative for many people, who can thus obtain credit more quickly and meet their obligations, explains the executive. During this expansion phase, JORNAL DE LEIRIA learned about how the business operates, as well as the motivations of those who have turned to it.

Gold pieces

Sara Alves, Catarina Alves, and Paulo Cordeiro opened their first Gold Shop in 2007 and currently have ten such stores in the Central region, including two in Leiria. They will soon open a pawn shop in Lisbon.
Business, they realize, fluctuates with the crisis. Currently, during the pandemic, they are resuming growth and considering opening new spaces.
However, they note, the sector is unlikely to achieve the boom seen in 2011, partly because families no longer have as much gold, which they had previously disposed of, and because offerings of this precious material at weddings and baptisms have been declining. In their stores, pawns are exclusively made of gold. "The piece is appraised according to the exchange rate of the day. We are appraisers licensed by the Imprensa Nacional Casa da Moeda," emphasizes Sara Alves. "And we act as trustworthy custodians, keeping the item in a bank vault," continues the manager. At the end of the contract and once the installments have been paid, which include an interest rate "lower than that of a credit card," the piece is returned to the customer. "And the entire process is governed by the regulations of the General Directorate of Economic Activities," emphasizes Sara Alves. "More than 90% of our customers make their payments within the agreed period and recover their item," says Paulo Cordeiro. Some people resort to pawning to pay an unexpected bill or cover the cost of an accident, but others also do so to secure a down payment on a home or to take a vacation. Their goal is to obtain a loan faster and without bureaucracy, the manager emphasizes.

Security and transparency“

"The lending activity is duly authorized by the Directorate-General for Economic Activities," emphasizes Luís Valente, president of APP, an association established five years ago and comprising more than 20 member companies from across the country, some of them located in Leiria. In these stores, customers can pledge a wide range of items, with some exceptions. This includes real estate, automobiles, military equipment, or objects intended for public worship, explains Luís Valente. The item is appraised—and the customer can always request an appraisal from an outside expert—and the store grants the loan.

Gold is scarce Growth, but not much

The president of APP explains that pawnshops have recently increased their business volume, although growth will not reach that seen during the 2008 crisis. This is because families no longer possess as much gold as they did at that time and because starting a pawn business requires some capital. He warns: "The sector faces strong competition, both from the buying and selling of gold and from other related activities, which involve gold and are not yet regulated." Paulo Cordeiro, from Loja do Ouro, also warns consumers against making "hidden" pawnshops at unlicensed shops, as not only do they lack protection if something goes wrong, they also pay higher interest rates than those established by law. This is the case with sales with a purchase option, he points out.