Pawn shops have been on the rise considerably since the Ministry of Economy and Finance approved licences for their operation in 2009. Cash-U-Up has been a licensed operator since 2010, when an initial $ 2.5 million investment helped open their first branch on Sihanouk Boulevard in Phnom Penh. Sear Rithy, chairman of Cash-U-Up, sat down with the Post’s Chan Muyhong to talk about the development of the pawn shop industry over the past five years.
Why did you open a pawn shop in the first place?
Cash-U-Up was established at a time when the banking and financial sector was still not very widespread. It was difficult for customers who needed urgent cash. Anyone who comes in to our store with collateral will be able to walk away with cash in less than 5 minutes.
The collateral can be jewellery, cars and motorbike and even a land title, which does not exceed $ 5,000. Pawn shops help people who are in need of fast cash when the bank of financial institutions cannot.
How is Cash-U-Up doing in the market?
We have seen a lot of progress. Cash-U-Up now has two branches in Phnom Penh, one in Sihanoukville, one in Siem Reap and two in Banteay Meanchey. We are planning to establish three more in Phnom Penh. Each additional branch requires an investment of between $1 million and $2.5 million. The total investment of Cash-U-Up now has reached almost $10 million and our profits each year has increased from 15 to 20 per cent.
What were the challenges in opening such a business?
Those coming to Cash-U-Up are mostly Cambodians who run small businesses and who need urgent cash to help business operation. Actually, the word “pawn shop” in Cambodia is very sensitive. In Cambodia, people feel embarrassed to enter a pawn shop, but they feel proud when they walk into a bank. It was a big challenge for us when we first started as a licensed pawn shop. There were customers who would ring us up so that they can enter through our office’s back door and even customers who would call us to meet outside of the pawn shop. That is why we have tried to set up our shop to look more like a bank. Now we have seen a little change in people’s perception.
Currently, how many pawn shops have licences and how many pawn shops do not have a licence?
As far as I know, there are less than six pawn shops that have licences to give out large amounts of cash while there are many pawn shops that are allowed to give out smaller amounts. Pawn shops with licences comply with the laws of Ministry of Economy and Finance. We do not do anything that violates the law. We obtain collateral properly – only items that have not been stolen. We do not take in collateral does not come with adequate documentation. For jewellery, if there isn’t a certificate telling us who it belongs to, the only thing we can do is to check the customer’s identity to see if they have a proper address or job. In addition to that, we have to report to the authorities once a month on what type of collateral we take in, in order to remain transparent.
The pawn shops that have no licence will take any collateral, even without proper documentation. Customers there also face a high risk of not getting their collateral back too.
Do pawn shops have a role to play in the wider financial spectrum?
Licensed pawn shops have been helping to smooth out the financial sector. We have seen a growing number of commercial banks and micro-
finance institutions, but each institution has different requirements for customers to meet before they can take a loan and those requirements take a long time. For pawn shops, customers can get cash immediately as long as they come in with collateral and then they pay it back within a certain amount of time. We do not question them on how much they earn per month.
What are the requirements to pawn something?
Generally, for jewellery, we give around 70 to 85 per cent of the property value, which we have evaluated. But for a car or motorcycle we offer only 60 to 65 per cent. We give four months for customers to get their collateral back, with an interest rate of about one to five per cent. We also accept the land title as collateral, but the value cannot exceed $5,000.
What are the risks involved in the business?
There are many risks involved in adjusted documents, fraudulent documents of used cars and motorbike, falsified gold and diamond certificates. There have also been cases where clients have not been able to redeem the collateral from us.
We manage the risks arising from the loss of the collateral by giving back only 60 per cent of the collateral value and giving just enough time for customers to pay the money and get their collateral back. We do not want the customers’ collateral, we only want the interest from the money. We try to find every way for customers to redeem their property.
This article has been edited for length and clarity.