Pawnshops replace banks during GFC
(5 March 2010 – Global) Russia’s central bank released a report last week revealing that pawnshops proved to be a major source of liquidity and credit for the nation’s business owners during the global financial crisis.
The central bank said that an 18 percent increase in pawnshop lending combined with a 25 percent rise in the number of pawnshops contributed to the country avoiding a fully-fledged credit freeze last year.
During the GFC sourcing liquidity and credit from pawnshops at 10 to 15 percent was a viable option for business owners in comparison to the staggering 25 percent interest banks were charging.
Lyudmila Sevtsova, director of Novoye Vremya, a pawnshop dealing exclusively in luxury Swiss watches, said that they would lend customers up to US$50,000 (A$55,000) using a luxury watch as collateral and when the loan including interest was paid back the individual would receive their item back.
Ms Sevtsova said her group saw an unprecedented influx of clients between September 2008 and mid-2009.
Russia's banking sector was hit hard by the global downturn. Fearing a rise in non-performing loans, most banks froze lending in the fall of 2008 and have not since boosted it to levels anywhere close to the pre-crisis lending high.
During the GFC sourcing liquidity and credit from pawnshops at 10 to 15 percent was a viable option for business owners in comparison to the staggering 25 percent interest banks were charging.
Lyudmila Sevtsova, director of Novoye Vremya, a pawnshop dealing exclusively in luxury Swiss watches, said that they would lend customers up to US$50,000 (A$55,000) using a luxury watch as collateral and when the loan including interest was paid back the individual would receive their item back.
Ms Sevtsova said her group saw an unprecedented influx of clients between September 2008 and mid-2009.
Russia's banking sector was hit hard by the global downturn. Fearing a rise in non-performing loans, most banks froze lending in the fall of 2008 and have not since boosted it to levels anywhere close to the pre-crisis lending high.
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