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Manila Bulletin devider Business devider Banking & Finance devider Pawnshops to offer more financial services—BSP

Pawnshops to offer more financial services—BSP

Published Nov 24, 2024 09:16 pm

The Bangko Sentral ng Pilipinas (BSP) is updating and expanding the allowable activities of pawnshops, including adding financial access touchpoints to effectively deliver financial services to a wider population.

In a new circular, the BSP proposes at least seven to eight additional corollary business activities that a pawnshop can engage in, besides lending money using personal property as collateral.

The BSP, recognizing the critical role of pawnshops in promoting financial inclusion, stated that the amendments will define the scope of pawning businesses and their allowable corollary activities to support their dynamic industry landscape and importance in delivering financial services.

The BSP defines a pawnshop business as the sale of goods with a repurchase agreement. Goods, in this case, refer to tangible personal property.

About 80 to 85 percent of pawnshop offices also have corollary businesses such as remittance agent and/or money changer/foreign exchange dealer; and/or operator of a payment system. Additionally, pawnshops registered with the BSP can be accredited as gold traders, allowing them to buy gold from BSP-registered small-scale miners.

According to the draft circular, which was circulated over the weekend with a feedback deadline of December 6th, the BSP stated that, subject to limitations under existing laws, rules, and regulations, pawnshops may also act as: remittance sub-agents; serving as cash agents of banks; and serving as cash-in/cash-out (CICO) touchpoints.

Pawnshops may also do business as: gold buying stations/partners of accredited gold traders; marketing and facilitating for its partners the availment by financial consumers of resilience-building tools such as microinsurance, micro-investment, and microfinance products and services; bills payment and/or top-up partners of utility and other companies; cash collection services and/or as corporate payout partners; and other services as may be determined by the BSP.

The draft circular specifically mentioned that pawnshops cannot engage in any gambling activities. The BSP emphasized that this includes, but is not limited to, engaging and/or operating as betting outlets or branches of any game of chance and/or facilitating the funding of gambling and/or betting thereon.

Pawnshops are popular because they can release immediate liquidity to borrowers using personal assets as collateral, and loans can be granted to individuals without credit history.

Over the years, accepted collateral has also diversified. Items now include luxury bags and most digital equipment such as mobile phones, aside from the usual gold and jewelry.

Based on the BSP’s 2019 Financial Inclusion Survey, pawnshops and money service businesses remained the top remittance channels used by 98 percent of senders and 93 percent of receivers.

As of the end of October this year, the BSP is supervising 16,219 pawnshops in the country. Pawnshops are categorized as non-bank financial institutions without quasi-banking functions.

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