FACED with another hard lockdown, conventional pawnbrokers are struggling to stay afloat as they have already incurred losses after a 50% drop in collection since the second movement control order (MCO) in January.

Although pawnbrokers are allowed to open during the lockdown from June 1 to 14, conventional pawn shops are less likely to see people coming in to exchange their valuables for cash due to competition from Ar-Rahnu, or Islamic pawnbroking, which generally has friendlier terms for customers.

Conventional pawnbrokers do not expect an increase in customers and predict  collection will be very low.

Malaysian Pawnbrokers Association president Tan Ho Keng said collection has dropped by halfsince January. Instead, people are only renewing their pawnbroking receipts.

“If there is no turnover then how are we going to operate?

“We need the turnover to roll cash. All our members have incurred losses between 20% to 30%,” he told The Malaysian Insight. 

Tan said that if a customer pawns their valuables for RM1,000, they can renew their ticket before it expires in the sixth month by RM120 for another six months, which works out to 2% per month.

“This is where we are facing losses because if they (customers) keep renewing their receipts, then there is no cash back.

“This will affect cash flow for other customers. There is more renewal than cash back.”

The association’s 500 members are all facing the same issue, Tan said.

“Everyone is facing difficulties. So far none have had to close shop, but we expect those that are not doing well to close soon. This is due to location and lack of customers.

“Our members have yet to cut staff salaries, but some have had to reduce the number of staff to survive.”

However, Islamic pawnbrokers expect to see business picking up, said Petaling Jaya Ar-Rahnu branch manager Khairunissa Zulkifle.

Business was up in the last two months, partly due to the Hari Raya festivities and as people speculated the current lockdown could stretch for more weeks.

“Customers were preparing for the full lockdown and we expect to see an increase in trade,” said Khairunissa, who runs the branch on Jalan Othman.

Khairunissa said Ar-Rahnu’s 11 outlets around the Klang Valley are also experiencing high customer traffic.

“Customers frequent Ar-Rahnu because we are Shariah compliant and our fees are much cheaper than conventional pawn shops.

“A lot of non-Muslims also come here because the fees are cheap,” she said.

Where conventional pawnbrokers extend a six-month lease, which is renewable with a fee, Ar Rahnu’s lease period is 18 months, and without processing fees.

Khairunissa added that Islamic pawnbrokers will not pawn customers’ valuables and will opt for negotiations first.

“If they have difficulty settling their fees, we can negotiate. We give them 18 months to collect their valuables.

“If they can’t, then we draw up a new agreement for them, which is to pawn the item again and refinance,” she said.

In April, during the Ramadan month, her outlet served about 400 customers.

“It was a 15% increase in business. In May we had more than 300 customers.”

Khairunissa said during the current lockdown Ar-Rahnu outlets will only open from 9am to 2pm, and limit customers to 50 people daily, so as to comply with standard operating procedures.

“We will have to turn some away and ask them to return the next day.” – June 3, 2021.