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PETALIZING JAYA: Hundreds of Malaysians who have lost their only source of income have started lining up outside the pawn shops, their pockets full of family heirlooms and jewelry belonging to their spouse.
With financial difficulties after losing their jobs thanks to the Covid-19 outbreak and the movement control order (MCO) imposed to stop its spread, these people have no choice but to look for alternative means of obtaining cash to survive.
The available data speak little of the ability of the Malays to make provisions for rainy days. According to their own survey, Bank Negara Malaysia found that 75% of Malaysians have less than RM1,000 in savings.
However, they end up paying a high price for such short-term relief.
Pawn shops generally pay only 30% to 45% of the value of the items they carry, according to financial consultant Nurul Athirah Mohamad Adam.
However, he said that customers could get 65% to 70% of the value of their items at pawnshops that meet syariah standards, such as Ah-Rahnu.
But that is not the only area where the customer loses. Pawn shops also charge 2% interest on the cash they dispense, or a total of 24% a year.
Despite the insignificant deal, many prefer such conventional pawnshops because they bypass most bureaucratic red tape, like filling out forms and waiting for approval.
But apart from the cash value, the sentimental attachment to such items is also lost, most of the time forever.
A pawn shop client, who wanted to be known only as Siti, said it was a difficult time for her and that she needed to get cash quickly.
He ended up pawning the jewelry his late mother had given him.
“It had sentimental value, but I had no choice because I urgently needed cash. Now I’m sorry. I also ended up paying much more than what I borrowed, ”he said.
Financial education trainer Dr. Desmond Chong noted that daily paid workers who have lost their jobs are most likely to search for pawn shops.
Chong, who is vice chairman of the Malaysian Financial Planning Council, said that some people have mistakenly assumed that it is easy to get money from a pawn shop.
“Instead of going to a pawn shop, someone who desperately needs money should first consult trusted family members and close friends,” he said. “Ask them for help by giving you a loan.”
He noted that it is not yet an easy option, but at least the borrower could save on interest.
“Those who go to pawnshops now may feel they need quick cash or cash for future use as we don’t know how long this MCO will last,” he said.
To avoid going down that path, Chong said people should first make a personal cash flow statement.
“Look at your cash in hand and then calculate your monthly expenses after taking the bank moratorium for six months,” he said.
“Keep your main income and if not, find an alternative second income during this difficult time,” he added.
Last month, Housing and Local Government Minister Zuraida Kamaruddin said her ministry had received many inquiries about the services provided by pawn shops.
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