Makeover for pawnbroking industry 

THE pawnbroking industry may see some consolidation in the next five to 10 years as it seeks to expand its market reach.

As Evergreen Max Cash Capital Bhd’s executive director Low Kai Loon points out, there will be a number of new and more vibrant things happening as the space becomes more professionally run.

It’s unlikely that today’s pawnbroking businesses can stay in the same family for generations, according to Low.

“Traditionally-run companies may not survive. There could be handover issues, or insufficient financial resources to compete.

“However, we know that without competition, there would be nothing really special, which is why competition will engender new products and strategies in the industry,” he tells StarBiz 7.

With an eye on the future, Low, who has been in the industry since 2016, says these are the things they hope to explore in the future.

The group currently has 92 pawnshops, with plans for 100 by year-end. His optimism is backed by Evergreen’s earnings growth over the last two quarters.

For the first quarter ended March 31, 2025 (1Q25) Evergreen Max posted a higher revenue of RM45.89mil and a higher profit of RM7.01mil.

For 2Q25, revenue hit RM48.78mil while profit was at RM9.27mil.

Low says the pawnbroking segment boosted their earnings in both quarters.

The group operates in two main segments. According to Low, one of these is pawnbroking, which includes conventional and Islamic pawns (Ar-Rahnu Tawarruq) and the other is gold trading and retailing.

“The growth engine for our financials has largely been our pawnbroking segment, which provides loans. We set a goal of disbursing RM1bil in loans this year, and we are on track to accomplish that.”

Over RM600mil in loans were disbursed last year.

Gold has been a major collateral for many people seeking financial assistance this year, says Low.

RM3,000 to RM3,500 is the average amount of loan taken, while RM10 to RM500,000 is the range.

Its gold trading and retail segment, albeit smaller, has still been a generous contributor to the group as well.

“The segments all work together because they are all connected. Gold trading, for instance, is also derived from pawnbroking,” he explains.

Low acknowledges that the industry has been somewhat in the shadows for a long time, mainly due to misconceptions.

“This industry has been perceived as lecherous, where we take advantage of people’s needs and charge a higher interest rate. The industry is also sometimes associated with money laundering because of the cash transactions,” he says.

This perception needs to change, because it is not the reality, he adds.

It is true that Evergreen might charge an interest rate of between 1.5% and 2% on a monthly basis, Low clarifies what it covers.

In contrast, banks may charge 4% to 5% per year, for instance, for a housing loan.

“It’s important to remember that the fees fall under the Pawnbroker Act 1972 so all rates are regulated. The interest covers a wide variety of things, such as the cost for valuation, storage and insurance of the items.

“I mentioned earlier how gold is a common commodity used, which means it is susceptible to price fluctuations as well.

“That’s the cost and risks we take on,” he says.

He believes the industry has some of the strictest regulations, especially regarding items brought in as collateral.

He says items are assessed to ensure they are genuine and not fake or stolen.

“Our internal system incorporates sanction lists from four main authorities – Bank Negara Malaysia, Home Affairs Ministry, Financial Action Task Force and United Nations Security Council Resolutions – to determine whether we can provide our services to a person.”

A customer has six months to come up with the funds to redeem their collateral after a transaction takes place.

Should a customer need more time, they can ask for a “roll over”.

“There is no limit to how many times the customer can rollover, the idea is to give them a chance to find the funds to regain their items.

“It is never our goal for them to default if at all possible, but some do,” he says, adding that around 10% of customers default.

When asked what happens to defaulted items, Low said they are cleaned up, made shiny, and auctioned off.

Some people are happy to purchase second-hand items here, which is where gold trading takes place.

Low says luxury items like watches, handbags and jewellery are acceptable, but not larger items like cars, motorcycles and electrical products.

“There is zero need for harassment in this industry, because at the end of the day, customers are not obligated to pay at all.

“Even the interest accrued on a monthly basis is covered by the item,” he says.

Low adds that compared to a bank, pawnbrokers are open for longer hours and are willing to disburse loans to a larger segment of people.

“It is only in the last few years that banks have been more accepting of pawnbrokers and we’ve been able to secure loans from them for this purpose.

“So we are glad about that,” he says.

Low hopes more people will begin to understand the business model and see the potential.

“In addition to being highly regulated, the industry is also very safe.

“We hope to continue educating people so they see the industry for what it really is, since there will always be those who need financial assistance and may struggle to get it from a bank.

“If you have an item you can use as collateral, why not?”