As far as most people are concerned,pawnshops are opaque and mysterious places, the last resort for those who have reached the end of their financial rope. Today, as all kinds of services modernize, Taipei City's government-run pawnshop is not only leading the way in lifting the veil of mystery, it is providing "value-added services" and is changing the stereotypical image of pawnshops.
In recent years the Taipei Municipal Secured Small Loans Service (SSLS) has provided employment information, and opened up to group visits by students and non-governmental organizations to help them understand the basic pawning process and how things like jewelry and diamonds are valued. They are promoting a system of licensing for collateral appraisal, and encouraging staff to take the SSLS appraiser certification exams, thereby transforming the old system of pawnbrokers passing on their knowledge to their apprentices.
Currently only Taipei and Kaohsiung still have state-run pawnshops. As a result of the financial crisis, about 30 private pawnshops have gone out of business in Taipei City, but there has been no adverse impact on business at the state-run facility.
Small change
The main reason is that monthly interest at the state-run pawnshop (0.7%) is far below that at private ones, and the rules are sometimes more flexible. The redemption period for gold or diamonds is six months at the state-run firm, but only three months at private shops (after which the pawnshop is free to sell the collateral). Moreover, risk is low at the state-run pawnshop because they accept fewer types of items, so private pawnbrokers often complain that the government is unfairly "grabbing up their profits" and "cherry picking."
SSLS director Chen Hwei-pin states that in contrast to private pawnshops where the relationship between pawnbrokers and clients is not always on the up-and-up, the SSLS mainly provides "micro-loans"; 90% of the loans are for less than NT$100,000. In most cases the money is needed to pay school tuition, utilities, or medical expenses, or to resolve similar short-term emergencies.
Chen notes that most people who bring gold as collateral use the gold jewelry infants traditionally get as a gift on reaching one month old. The average value is about NT$30,000. Because interest is below market rates, some people have been coming for years to pawn and redeem their small gold stash whenever hard times hit. Therefore the foreclosure rate is low (98% of items at the state-run facility are redeemed). Of items that do eventually get sold, the great majority are, once again, gold jewelry. At present, the ten branches are storing about 40,000 gold items in all.
Despite the economic downturn, there has been no obvious difference in business at the SSLS. The real boom was two years ago, during the big crisis over credit card debt. At that time, as banks began renegotiating debt, many parents bit the bullet and pawned family heirlooms to help their kids clear up card debts. This drove the number of pawnshop borrowers up by 10%. However, if the current hard times persist, Chen thinks that there could very well be another high tide of pawn transactions.
The gold standard
Fifty years ago the most valuable collateral was gold and Western suits. For the latter, if the material was imported, then you could borrow NT$400 against each suit, which in those days was about equal to the monthly salary of a typical civil servant. You could borrow NT$200 against a man's or woman's topcoat, NT$250 against a gold watch, and NT$300 against a bicycle. Times have certainly reshuffled the deck, and only gold still holds its former allure, holding fast to its place as "top dog" in the pawnshop rankings. Diamonds don't get any takers unless they are over half a carat, while electronic goods are worth very little because of rapid obsolescence.
Although the state-run pawnshop sets restrictions on what can be accepted as collateral, there was one father who, to get some liquidity for his business, hocked the German-made flute that his daughter had practiced on when she was a small child, as well as two men who lumbered in with an old Chinese zither to borrow NT$2000, both of which the SSLS reluctantly accepted. "But in both cases the items were redeemed. This is what is so great about the people who deal with us-no matter what it takes, they are somehow going to find a way to get their beloved items back!"
The SSLS long ago stopped accepting bicycles because they were not valuable and not easy to store, but outdoor recreation has made bicycles hot items, and the SSLS may change their rule back. In this regard, since the SSLS last year created a website (shwoo.taipei.gov.tw) to help government agencies and schools sell off second-hand items that have been withdrawn from service but are still usable, bicycles have been the best sellers. With the help of repairmen working in the Environmental Protection Department, they sold their entire stock of 40 bikes (opening bid: NT$500) in one month!
Old stuff, new life
The "shwoo" website has provided numerous surprises in addition to appealing to people's sense of nostalgia. Chen Hwei-pin says by way of example that a restored old rattan chair was bought for NT$100 by a delighted bidder who had long had back problems but couldn't afford NT$2000 for a new one. Another buyer who had been searching high and low for ages was able to buy an old-fashioned radio as a gift for his aged father. Another bidder scarfed up seven or eight old computers at once to give to a church for use by children living in remote parts of eastern Taiwan, helping the children acquire the marketable skill of computer repair in the process. Chen feels extremely pleased that these old objects have found new uses and are helpful to people.
The thing that sells worst on the website? That has to be 3.5-inch floppy disks, of which Chen says simply, "we have a mountain of them."
Not only about the money
Chen hopes that as times change the SSLS will evolve into more than a source of small loans, and will offer more "value-added" services and become "a bank for the poor that respects each and every individual."
One of the most important services already provided by the SSLS is employment help. Chen has discovered that poor and disadvantaged people who come to the SSLS have no idea how to go about getting government assistance and are in urgent need of information on employment and welfare services provided by the state. That is why three years ago the SSLS got together with the employment services center of the Taipei City Government to provide employment information. While taking pains to ensure the dignity of the person they want to help, they have figured out a roundabout way to get him or her to fill in a simple form. Those who accept employment training and successfully start working on their own or find a job can receive an award of NT$3000-5000. The same even applies to jobseekers' children who perform very well in school.
In the three years since the service was begun, five people have found jobs and 26 have completed occupational training. "Although these numbers aren't large, compared to the success rate of less than 1% at the central government's employment assistance center, our rate of 2.5% is really encouraging for all of us!"
The Caring Side of Pawnbroking
