Microfinance through pawnshops: Commercial sustainability and impact evaluation

Abstract

This article examines the pawnshop as a vehicle of microfinance. In East Asia, the mainstream financial sector has grown quickly over the past few decades in tandem with rapid economic growth. In this environment pawnshops continue to play a significant role, especially in serving the lower-income segment of the population, whose access to mainstream financial institutions is very limited. Despite the absence of governmental assistance and donor support and the existence, in some countries, of restrictive regulations, the pawnshop has survived for decades and has in fact expanded consistently. This article considers the ways in which the pawnshop, as a microfinance institution, manages to overcome the problems of commercialization that similar institutions face around the world. In addition, using pawnshop data from Singapore, which is the only country in Asia where aggregated statistics on pawnshops are available, and examining qualitative data from interviews with pawnshop owners, an impact assessment of this institution is conducted.