Money worries will always be a problem in society. Almost everyone has experienced being broke or had some kind of financial problem. As long as humans consider money to be everything, it will continue to bring about tragedy. People have lost their houses and land, and some have even committed suicide. Others dare to cheat their family, relatives or friends for money to solve a financial problem.
Meanwhile, banks and microfinance companies have been spreading in the Kingdom, helping Cambodian citizens avoid financial problems. Pawn shops and private loan providers are still more popular, however, for they are believed to provide a better service without complicated contracts or application processes.
Rantanak, owner of Rantanak pawn shop, says: “To pawn, costumers just follow an easy policy: if they want to pawn small items, costumers must leave their identity card with the shop. But if they want to pawn big or expensive things such as houses or land, an identity card is not enough, and then a costumer must come back with other family members to sign a contract.”
Although legal pawn shops provide a good service to customers, some Cambodian people, especially teenagers, still prefer to use illegal ones. Sieha, an undergraduate at the Royal University of Phnom Penh, says that he uses illegal pawn shops rather than a legal one because illegal pawn shops provide almost 24-hour service, so he can get money even late at night.
“As I always bring small, cheap objects to pawn, I do not dare to go to a bigger shop because a hidden pawn shop is more suitable for me as it brings less shame.” Sieha says.
Another popular way of solving money problems is a private loan provider, because this kind of service also doesn’t have a contract process.
Leng, Dem Kour, a market trader, says she is one loan provider in the market among others, but this business is not big because she only gives loans to people who she knows well, and that the loaning process is free of contract. She says she charges a standard interest rate: for a $1,000 loan, a costumer must pay $15 every day for three months; if the loan is $500, the costumer must pay $10 a day for two months.
“This business is profitable, but it is very risky because sometimes customers disappear and do not repay me.”
When running a business, money moves around in a circle, so it is easy to encounter a financial crisis and then a private loan provider is often the most preferable solution. Lyna, a vendor in Olympic market, says she always goes to a private loan provider when she has money worries. It is an easy way to get the money fast without a contract - and it is confidential.
“The rate is expensive, though. If I borrow $100, I must pay back $20 every day for 57 days, so the lender gets $140 from me.”
Nov Sieha, chief finance officer of Western Education Group, said although informal loans and pawning is available in most developing countries, it is not necessarily a negative sign of its economic state, since it does help people who have lower average income develop or sustain their businesses.
Sieha warns, however, that people must realise that pawning and loans from private lenders are risky because the interest rates are higher compared to bank and microfinance loans.