The interest rates are quite high.
Richard, an employee at a pawnshop in the bustling area of Manila, told reporters that pawnshops generally only pay customers 20% to 40% of the market value of the items being pawned. The mobile phone I brought with me is currently valued at around 12,000 pesos (approximately 2,000 RMB), but Richard said I could only exchange it for a maximum of 2,000 pesos (about 330 RMB) because the phone has been used for over a year, and depreciation costs must be deducted. After assessing the value of the item, the pawnshop provides the customer with a note detailing the condition of the pawned item, such as the phone model, weight and length of jewelry, as well as the amount exchanged and the interest. Pawnshops charge customers an interest rate of 3% to 5% per month. Some pawnshops deduct the interest for the first month. When customers want to redeem their items, they must pay the amount exchanged plus interest. If customers fail to redeem their items within six months, the items become the property of the pawnshop. Due to the high interest rates, many customers are unable to redeem their items, which is where pawnshops make their most profit. In a pawnshop near Manila's Chinatown, there is even a dedicated counter selling second-hand jewelry that has not been redeemed. Many Filipinos buy their mobile phones at pawnshops for a bargain.
Intense Competition Leads to Innovation
Because of pawnshops, the poor manage to get by, which contributes to social harmony and stability. On the other hand, the worse the economy, the more pawnshops open, which in turn helps create jobs and promote economic development. As early as the 1970s, the then-president enacted the Pawnshop Management Act to encourage and regulate the development of pawnshops. Industry insiders estimate that the growth rate of pawnshops will exceed 10% in the coming years. The process of opening a pawnshop is quite simple; with a capital of 100,000 pesos (approximately 16,000 RMB) and a fee of 1,000 pesos, one can obtain a business license in about two weeks. Due to fierce competition in the pawnshop industry, owners are competing to attract customers with creative ideas. In 2002, the first "mobile phone pawnshop" chain in the Philippines opened. The "mobile phone pawnshop" not only engages in mobile phone pawning but also sells new and used mobile phones and parts, as well as offering mobile phone repair services. Currently, there are over ten branches of mobile phone pawnshops, each using the trendiest mobile phone models at the time as the store's "image spokesperson" sign, so one can tell the year the "mobile phone pawnshop" opened just by looking at the sign. Recently, a "laptop pawnshop" has also emerged in the Philippines.
Why Filipinos Don't Like to Save Money
Why do Filipinos not like to save money? Some believe it is related to the living environment in the Philippines. The Philippines is hot and humid, and people jokingly say there are only three seasons: hot, hotter, and hottest, with an average annual temperature of around 27°C. In such a climate, the various islands of the Philippines are lush year-round, with fruits and vegetables everywhere. Because there is no worry about food or clothing, Filipinos do not have the habit of saving money; they spend whatever they have. Government agencies and businesses in the Philippines generally pay salaries every two weeks, and Filipinos usually go shopping, dining out, or singing karaoke right after withdrawing their salaries from the bank, until they have spent all the pesos in their pockets. When they encounter traffic jams on the road, several street vendors selling cigarettes suddenly appear, selling them one by one. Smokers never care that buying loose cigarettes is more expensive than buying a whole pack, possibly because the remaining money is not enough to buy a whole pack of cigarettes.
