Pawnbrokers Flourishing in Singapore

Casinos in Singapore has been a perfect storm for the city-state’s booming pawnshop industry, adding large numbers of gamblers hard up for cash to residents oppressed by a rapidly rising cost of living. The sector loaned the equivalent of US$4.4 billion last year, more than triple the volume of five years ago.

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 has increased to 214 this year from 114 in 2008, two years before the city-state’s two megaresorts opened, according to a report by DMG & Partners Securities. Loans disbursed by the industry jumped to S$5.5 billion (US$4.4 billion) in 2013 from S$1.6 billion in 2007, government data show.

“Pawnshops are the most-frequent automated teller machines for regular gamblers,” Ivan Ho, president of the Singapore Pawnbrokers’ Association, said. “They need capital and pawnshops offer them loans that are reasonably priced.”

Since Singapore’s two casinos opened in 2010, about 20 percent of the increase in pawn broking activity is driven by people raising money for gambling, said Ho, who’s also the owner of Heng Seng Pawnshop Co.

ValueMax, Maxi-Cash and MoneyMax Financial Services dominate the industry, owning almost 40 percent of all pawnshops in Singapore, according to DMG. Their combined revenues are expected to increase 8.7 percent to S$577.7 million in 2014 from a year earlier, according to DMG. The three companies raised a combined S$103 million from initial public offerings in the past two years to fund expansion, regulatory filings show. MoneyMax, for example, will add four outlets to bring its total to 40 by the end of the year, said Chief Financial Officer Choi Swee Weng.

For MoneyMax, which forecasts revenue will climb to S$100 million in two years, it was the opening of the casinos that created the opportunity.

“In Macau, you see casinos and pawnshops,” founder Peter Lim Yong Guan said. “That gave us an idea.”

But there are other factors. A lot of the growth has been driven by business owners and low-income individuals who need quick cash to pay hospital bills and other costs of living in one of the most expensive cities in the world. Singapore 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 transportation 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 pawn broking industry also got a boost as surging gold prices increased the amount of collateral borrowers could access. Spot gold climbed to a record $1,921.17 an ounce in 2011 before tumbling 28 percent last year.