The ‘Pawn’ Phenomenon
A Bulletproof Business in a Down Economy is Booming

September 1st, 2009
by Thomas Tomczyk

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The Coxen Hole Pawn Shop 'Inversiones #1'

The Coxen Hole Pawn Shop 'Inversiones #1'

Melvin Calix spends nine hours a day behind bars, but he’s committed no crime. Instead he’s working in a family business that’s booming not despite of the recession, but because of it. The Calix family pawnshop in Coxen Hole, Inversiones Dinero Urgente, is their first on the island after several on the mainland, and takes its security seriously.

While most Roatan pawn shops have an open, walk-in feel with goods for sale openly on display, customers talk with Calix through an imposing cage of bars flanked by a securely padlocked iron door. Calix puts the precaution of the cage down to the family’s experience on the mainland. “We’ve never had any trouble here, people are relaxed. But in our mainland stores people have been assaulted, so we take care of ourselves with the cage.”

Another pawn is located in a crowded area of Coxen Hole, nestled in the strip shops of ‘the Mercado,’ doubling as a watch repair shop since its establishment in 2000, “Taller Joyeria” specializes exclusively in gold items as collateral for loans. Of the many items that become the property of the shop when borrowers default on payments, Manager Alexander Contrera says most are shipped to San Pedro to be melted and turned into new gold items.

“Being able to tell the quality of gold is important in my work,” says Alexander, “and I draw on the many years of experience behind me.” The shop occasionally deals with customers trying to sell or pawn imitation gold as the real thing, says Alexander, who uses chemical tests to test that gold is genuine.

Pawn shops, or ‘Casas de EmpeƱo,’ lend money at high rates – up to 2% compounded daily – based on the value of goods that are ‘pawned’, or left with the shop as a kind of collateral. Hannoh Ebanks, owner of a Coxen Hole pawn shop explains, “We accept tools, electronic gear and other valuables as collateral, but the vast majority of pawned items are gold.”

Gold, the staple of pawnshops, is valued on a per gram basis by the shops, which then offer loans at approximately 15% of the value. Customers pay interest at set periods varying from every week to every two months, depending on the shops they deal with, with some shops imposing limits on how long goods will be held.

Some customers understand the high cost of loans, but have few other choices. “I gave the ring to my wife many years ago, she keeps it in a box and doesn’t know I’m here pawning it,” says a pawn shop customer from Los Fuertes about pawning a gold ring handed down from his mother. “I only do it because we’re under such financial pressure.”

The ring was valued at $400 and has secured a loan of $60 for the man, who knows he is paying a high interest but feels he has no other choice. With interest calculated daily, in just one month the man will owe almost $50 in interest, an effective rate of over 40%. To maintain the loan for a year is likely to cost over $500.

It’s no surprise then that many customers are unable to make payments and reclaim their pawned items. According to Ebanks 60% of customers never come back for their property. In many cases pawn shops sell gold items in bulk to trading partners on the mainland, where demand and price is higher.

Pawning is a growing business, and Calix estimates that business has risen by as much as 20% since last July, with the family opening a second shop in Coxen Hole in November in order to store the increasing numbers of pawned goods. “People need money in times of stress, and we provide a service which gives people more options,” he said. [/private]

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