
Oct
What You Should Know about pawnbrokers in Malaysia
The first record of a pawnbroker was in Ancient China more than 3000 years ago. They will loan cash to peasants and farmers for a short term with their possessions as collateral.
In Malaysia, the activity of Pawnbroker is under the Pawnbroker Acts 1972. It regulates the activities, the necessary license, and lender protection. But first, let’s understand what pawnbrokers are. What do they do? And how it’s crucial for micro-businesses.

How Pawnbrokers work
Do not confuse pawnbrokers with a Lombard Shop or any similar loaning activities. As the government regulates pawnbroking activity. You can easily differentiate legal pawn shops from illegal ones.
Pawnbrokers will accept goods in exchange for a loan. The number of loans is relatively small to correlate with the goods. Based on the Pawnbroker Actas 1972, the maximum amount they can lend is 20,000 Ringgit. If they accept more, then they’re risking losing their license.
They will keep the goods for a period, based on the agreement with the borrower. Both parties are responsible for upholding the pledge.
The borrower will have to repay the loan and interest fee before the time is up. They can choose to pay in installments or at the final term. And if they fail, the broker retains the right to possess the collateral.
What do they accept?
Most pawnbrokers accept various goods as collateral. You can pawn your vehicle, land deed, jewelry, and valuables. It’s worth noting that the broker will assess the goods before approving a value.
The pawnbroker will issue a pawn ticket for the borrower as proof of ownership. Later, they need to show this ticket when redeeming their goods.
Are my goods safe?
Pawnbrokers will keep your goods until the term is over. You don’t have to worry because they have a safekeeping method to protect the goods.
License pawnbrokers also will insure the goods in proportion with the value. And the borrower has the right to check their goods when redeeming. After all, they need to see if the goods are in the same condition as when they first brought them in.
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Is PawnBroking halal?
The type of Islamic pawnbroking is common in countries with Muslim populations like Malaysia. Unlike conventional pawnbroking, Ar-Rahnu or Islamic pawnbroker doesn’t take any interest from the loan.
In return, they will charge the lender the safekeeping fee. This fee is less than 10% of the loan amount and the goods’ value. The rest of the procedure is just like that of a conventional pawnbroker.
How Micro-small businesses can benefit from this
Both types of pawnbrokers can help micro businesses that don’t have access to the bank. They can come to a pawnshop with the collateral to receive a loan.
Many micro-business owners choose pawnshop because it’s safer and offers a low-interest rate. Their collateral is also safe from thieves and robbers at home.
Pawnbrokers are a short-term solution for your financial issue. They offer a secured loan with a low-interest rate. As each broker offers different rates and fees, you have a wide selection of which shops to visit.
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