A recent article in the International Business Times suggests that the pawnshop business is poised for large growth in Latin America and points to Mexico in particular as a hotspot.
Pawn lenders are seeing growth opportunities in Latin America as these markets offer a broad customer base that still rely on the age-old mode of borrowing.
“What is so compelling about these countries is the high number of “underbanked” and “unbanked” customers,” Roth Capital analyst Elizabeth Pierce said.
“These are customers that don’t have a traditional banking relationship. It’s a cash-driven economy.”
Pawnshops, by their very nature, serve segments of populations that do not have access to the traditional banking system. Therefore, the mention of “underbanked” and “unbanked” customers above would apply, in my opinion, to all of Latin America, the Philippines and most of Asia as well. As MIM reported earlier this apparent by the legalization of pawnshops in Cambodia
One might even ask if there are “underbanked” and “unbanked” populations in the nations where the banking system has a greater presence. In the United States and Europe, banks and their branches are common in nearly every community. But what can not go unnoticed in the Western countries is that there has also been a breakdown in banking system. The very definition of the economic plague spreading throughout the United States and Europe is that it is a credit crisis.
Starting in 2008, the western banking system found itself so overloaded with debt that had no reasonable chance to be re-paid back that it had to turn to government financial help just to stay afloat. Of course, the most common criticism in the United States is that even though the government has pumped hundreds of billions of dollars into the banking system, the banks still are not lending. Will pawnshops fill the void in lending in western countries just as it is doing in regions like Latin America and Asia? Time will tell.
As for Asia and Latin America where the banking system never had the presence that it had in the western countries, I think it is easy to assume that the pawnshop industry has more growth to come as it fills a void in the lending systems left by banking institutions.