Russian pawnshops increased lending to individuals by 18% in 2009 as banks were unwilling to extend loans to citizens over the high risk of defaults, a respected business daily reported on Wednesday.
Kommersant cited a financial stability report prepared by the Russian Central Bank, which said interest rates on bank loans as high as 25% per month helped pawnshops step up their business last year amid the ongoing crisis.
The report said the pledged items largely involved highly liquid assets such as gold jewelry.
The volume of pawnshop business in Russia is hard to assess as pawnshops extend loans for a limited period - on average less than two months - and, therefore, demonstrate high turnover, Kommersant said, referring to Dmitry Terentyev, general director of United Lombard.
"Proceeding from this, the volume of lending in 2008 measured about $1 billion, although pawnshop business assets were estimated at $120-180 million. Last year, lending increased 15-20% to about $1.2 billion," Terentyev said.
The pawnshop market develops reversely to the banking market. Pawnshops are particularly popular during times of crisis, when people need money urgently and without any checks, and when banks are curtailing their lending operations, the paper said citing analysts' opinion.
An advantage of pawnshops is that they do not have to make provisions for loan impairment, which cut bank profits last year and prevented them from developing their business, the paper said.
However, as the economic situation in Russia stabilized in the second half of 2009, the sharp growth in pawnshops' business came to halt, the paper said.
MOSCOW, March 3 (RIA Novosti)
