Banking regulations did not leave the pawn shop business a chance

Banking regulations did not leave the pawn shop business a chance

access_time2019-04-17 11:17:45

Since  banking regulations were launched, the number of pawnshops has decreased from 600 to 137, while  the interest rates have increased, the financier Irakli Berdzenidze says summarizing the regulations enacted by the National Bank  four months ago.

According to Berdzenidze, as a result of  the new regulations,  most  pawns are facing financial defaults, which actually led to a reduction in their number.

In  Berdzenidze’s words, the requirements for registration of loan issuer were so numerous that even before the regulations were launched, everyone had known that all this would force many subjects to leave  the market.

He also mentions the requirements set by the regulator for small and medium pawn shops. By doing so, the pawn shops’ expenditures have  increased that puts at risk their profits. Berdzenidze believes that  hard regulations which radically reduced the number of  pawn shops  did not leave the pawn shop  business a chance to survive:many of them had to sell their loan portfolio under onerous  conditions.


It’s worth mentioning that the pawn shop  business had no negative social effect. Moreover, it was an ideal way to get access to cash resources. Due to  big competition, the interest rates were lower than the interest rate on bank loans.

 

“Four months have passed and the launch of the  regulations led to disastrous results: only 137 subjects managed to register, the pawn shop portfolio  went into the hands of large financial institutions and put  the existence of the  pawn shop business is question, - Berdzenidze says.

He adds  if this trend continues, the country will have the non-bank financial market without  competition, with small players and increased interest rates that will deprive  the user to have a variety of alternatives.


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