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Pawnshops cash in on business from gamblers$5.5b loans in 2013, up from $1.6b in 2007, after opening of casinos in 2010
Yeah Lee Ching recalls when a lady walked into her pawnshop in Singapore and pledged a US$10,000 diamond-studded gold Rolex watch to bankroll casino spending. She never came back for her jewellery.
Pawnbrokers are proliferating across Singapore as gamblers seeking short- term loans add to demand for quick cash from people struggling to make ends meet in the world's most expensive city. The number of pawnshops in the city-state surged to 214 this year from 114 in 2008, according to a report by DMG & Partners Securities. Loans disbursed by the industry jumped to S$5.5 billion in 2013 from S$1.6 billion in 2007, government data shows.
"Pawnshops are the most-frequent automated teller machines for regular gamblers," Ivan Ho, president of Singapore Pawnbrokers' Association, said in an interview this month. "They need capital, and pawnshops offer them loans that are reasonably priced."
Since Singapore's two casinos opened in 2010, about 20 per cent of the increase in pawnbroking activity is driven by clients raising money for gambling, said Mr Ho, who's also the owner of Heng Seng Pawnshop Co. The rest comes from business owners and low-income individuals who need quick cash to pay hospital bills and other unexpected costs.
"I pawn my jewellery when the need arises," said Vikki, a businessman who runs his own security agency and asked to be identified only by his first name. "The biggest loan I got was S$70,000 to cover salaries of my staff when payments from customers got delayed." He was speaking outside the ValueMax Group pawnshop in Little India, just across the street from competitor Maxi-Cash Financial Services.
S Pandian, a 50-year- old construction supervisor from India, was pawning a chain and gold ring at the same ValueMax shop. He said he earns about S$1,600 a month and sends most of it back to his family, making it hard to cover living costs.
ValueMax, Maxi-Cash and MoneyMax dominate the industry, owning almost 40 per cent of all pawnshops in Singapore, according to DMG. Yeah Lee Ching, in whose shop the US$10,000 Rolex was pawned, is the executive director of ValueMax.
The three companies raised a combined S$103 million from initial public offerings in the past two years to fund expansion, regulatory filings show. For MoneyMax, which forecasts revenue will climb to S$100 million in two years, it was the opening of the casinos that created a market opportunity.
"In Macau, you see casinos and pawnshops," MoneyMax founder Peter Lim Yong Guan said in an interview on June 12. "That gave us an idea."
While Macau might have been the inspiration, MoneyMax's Singapore clientele has turned out to be mainly people seeking money for living costs rather than gambling, he said.
The Republic topped Paris, Oslo, Zurich and Sydney in the Economist Intelligence Unit's Worldwide Cost of Living Survey released in March. An influx of foreign workers has contributed to competition for jobs, congested public transport and surging home prices. The gap between the richest and the poorest Singaporeans rose in 2012 to the widest since 2007, before narrowing last year, according to government data.
The pawnbroking industry also got a boost as surging gold prices increased the amount of collateral borrowers could access, said Ms Yeah, executive director of ValueMax, the biggest such broker by market value in Singapore. Spot gold climbed to a record US$1,921.17 an ounce in 2011 before tumbling 28 per cent last year.
Whatever the reason clients need cash, it's not a pawnbroker's job to ask. "Sometimes we hear the customers saying maybe we'll get lucky this time," said Henry Kiew, who works at the ValueMax outlet in Little India, a 15- minute drive from the Marina Bay Sands casino. "Then we know they'll go to try and win back losses."
Shadow lenders, also known as matao, extend loans to gamblers backed by valuables, according to Mr Ho of the pawnbrokers' association. The client gets 50-60 per cent of the value of their jewellery - lower than the 80-90 per cent rate offered at pawnshops.
If the customer doesn't pay in three days, the matao takes the valuables to pawnshops and passes on the pawn ticket to the original borrower, Mr Ho said. The pledge can be redeemed by anyone who produces the ticket, he said, adding that pawnshops do not know mataos or their representatives.
The city's Registry of Pawnbrokers has not been informed of any unlicensed pawnbroking activities in casinos, it said in an emailed response to questions. The penalty for such an offence is a fine of as much as S$20,000, with a subsequent conviction leading to a possible prison term of as long as a year, said the regulator, which operates under Singapore's ministry of law.
Spokesmen for Marina Bay Sands and Genting Singapore's Resorts World Sentosa declined to comment for this story.
Singapore identified pawnbroking as an industry where controls can be improved to curb money- laundering and terrorism financing, according to the country's national risk assessment report in January. As transactions in the industry are mainly cash- based, risks are posed by clients repaying debt using illicit funds and pawning illegally obtained items, the report said.
Pawnbrokers conduct basic checks to ensure they do not deal in illicit goods, and maintain records on customers to counter money-laundering and terrorism financing, the Registry of Pawnbrokers said. Amendments to industry rules this year will introduce more obligations to encourage vigilance among brokers, it said.
"The performance of the casino resorts will be one of the key drivers empowering the pawnbroking industry moving forward," DMG analysts Jarick Seet and Terence Wong wrote in their May 30 report.