PEGADAIAN Indonesia

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Monday, October 09, 2006

Pawnshop's Operator Expands Its Small-Business

Economist Intelligence Unit (IEU) says that pawnshop have become increasingly popular as a source of funding in Indonesia since the Asian financial crisis of 1997-98.This has resulted in booming business for state-owned Perusahaan Umum Pegadaian, the country’s only licensed pawn brokerage.

It's true ? Not at all !. Public views should recognizing. There are consumerize level that on high grade if we watched intensively in several big cities, likes jakarta, surabaya, makasar and denpasar. Public needs emergence fund. They wants the fastest loans. These are the main problems.

Analysis EIU then tells. Following, the economic crisis and the subsequent government bail-out of banks in the late 1990s, many local financial institutions became reluctant to lend to customers because of the heightened risk of defaults and the ongoing, and lengthy, restructuring process. Banks’ lending rates have remained high, averaging about 15-19%. Their expansion of credit has stayed relatively slow: they extended Rp79.4trn in new loans in 2002, compared with Rp56.8trn the year before.

Pegadaian has taken advantage of this market opening by increasing its lending to small businesses and consumers. Unlike a bank, it does not require a customer to open an account or to make a time deposit before it extends a loan. Typically, one of its pawn shops extends a short-term loan (up to a maximum of four months), ranging from Rp20,000 to Rp250m, after a customer offers property—such as jewellery, cars or electronic goods—as collateral. It holds these goods at the shop until a specific date, when the customer buys back the items at a set interest rate. (It also provides custodian services at a low cost for items such as electronics, autos and precious stones, much like the services available at larger banks but in a different way.) Customers authorise the pegadaian to sell the collateral through auction if they fail to settle their loans. These have proved to be profitable businesses: Pegadaian’s profits rose to Rp229.45bn in 2005, from Rp162.87bn a year before. It increased its lending, to Rp14.1trn, in 2005.

Pegadaian raises much of the money for these small-business and personal loans by issuing bonds in the domestic market. In 2004 it sold Rp400bn in local-currency bonds, and it plans to offer another Rp500bn in July 2005. Most of its funding is medium to long term; in addition to bonds, it issues bank and government loans and medium-term notes. The company is not allowed to raise deposits from customers.

Pegadaian in 2005 has more than 12.5m customers nationwide, most of whom live in rural areas, according to Indonesian rating agency Pefindo. Its nearly 6,000 employees provide services through 819 outlets in more than 14 cities across the country, including 13 new shops that opened in 2006.

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