For Many, Pawning Is a Smart, Not Desperate Move

The Jakarta Globe

In the days before Idul Fitri, the scene is always the same — long lines of people at pawnshops who want to get some quick cash to fund their annual trek to their hometowns.

This year, though, customers leave with a bit more sparkle in their eyes after pawning their jewelry as gold prices sit at an all-time high.

A gram of gold is now priced at about Rp 530,000 ($62) on the local market, a jump of more than 40 percent from going rate before Idul Fitri last year.

This means, for example, that 36-year-old Sumiatun can borrow as much as Rp 18 million from state-owned pawnshop operator Perum Pegadaian, in exchange for pawning her 25-gram gold necklace and 15-gram gold bracelet. A person can borrow a maximum of 85 percent of the estimated price of a pawned item.

The entrepreneurial woman, who works primarily as a cleaning lady, is holding much of her and her husband’s savings in the precious metal, and this is the first time she’s going to pawn them.

“I want to take advantage of the high price of gold now,” Sumiatun said while waiting her turn at the pawnshop in Keramat Raya, Central Jakarta.

“I am going to use the cash to go back to Tegal [Central Java] to celebrate Lebaran with my family, and I will buy traditional Muslim outfits in Tanah Abang and sell them back home,” she said, adding that she would use the profit from selling the clothes to redeem her gold jewelry after a couple of months.

Many Indonesians still lack bank accounts and access to conventional bank loans. At the pawnshop, they can borrow between Rp 20,000 and Rp 200 million — often enough to pay off bills or tide them over during a crisis.

In the lead up to Idul Fitri, extra cash is often needed to pay for the trek home, known as mudik , and to buy new clothes to flaunt during the celebrations. Irianto, a spokesman for Perum Pegadaian, said that the holy month usually sees a 5 to 10 percent increase in business.

Indeed, around this time every year, 43-year-old Indriyani can be found in the waiting room of a pawnshop. This year, she’s going to pawn her 15-gram gold bracelet.

“One thing that I like about the pawnbroking system is that it is quick, and I do not have to pay high interest,” she said.

Perum Pegadaian allows customers four months to pay back a loan, plus interest, or to extend it for another four months. Interest rates range from 0.75 percent to 1.3 percent per 15 days, depending on the amount of the loan, plus a 1 percent administration fee.

But aside from that, Indriyani says she feels it is a secure place to keep her precious assets while she is away.

“I just feel safer leaving my jewelry at the pawnshop rather than bringin g it with me, as I do not want it to be stolen on my way back home to East Java,” Indriyani said.

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