Dealing with the Customers

Pawn Broker In Vengambakkam

I came across a pawn broker in Vengambakkam who is a native of Rajasthan but has been living here since the year 2000.Pawn brokers are unorganized lenders who lend money at interest to the needy people in lieu of some ornaments preferably gold and silver ornaments as mortgage for a shorter period of time preferably 2 years.This requires him to deal with local people in and around Vengambakkam.Following are the details of his buisness :

1. Initial Phase                : He started this business in the year 2002, after leaving his job in Chennai with a seed capital of Rs.20000.Initially, the business attracted little interest as people were mostly agriculturists and there were not much developmental work going on.Mostly people of Vengambakkam were his customers.Given the requirement of the buisness, he learnt Tamil in 2-3 months and now has become very fluent in it.

The electronic weighing machine

The businessman with his brother

 2.Intermediate Phase    : 5 years down the line through word of mouth and willingness to help the needy he won the trust of many customers and moreover due to the developmental work going around, his customer base started to expand. To handle the increasing workload he brought his younger brother from native place.Gradually, the business reached Neikuppi and Manamai. 

3.Present Phase                         :Now he caters to 6 villages including Vengampakkam namely- Manamai, Kunnathur,Methhamed,Poonthhalam & Neikuppi.And he now owns a smaller locker of 100 Kg capacity in the shop and a bigger Locker of 1500Kg stationed in a nearby Bank. 

4.License                                    : His is a licensed pawn broker shop, though he informed that some also do the business without a proper license.

the first weighing balance

 5.Profit                           : He did not disclose his Turnover/Revenue. But, informed that he earns a profit of around 3% per year. Hence, his business goal is always to increase transaction volumes so as to earn as much as he can. 

6.Customers' Profile     : Majority of his customers is the small time construction contractors and farmers who generally borrow for a maximum of 2 years’ span.

The receipt to finalize the deal

 7. Buisness Process         : Customer’s deposit the ornament which, if it’s of smaller value of within Rs 10,000, is weighed, valued and then kept in the shop. Ornaments of larger value are weighed valued and are deposited in a nearby Bank which charges him 13% in lieu of cash and a receipt stating the name, address, the principal and interest rate. He offers his customers an interest of 16% which is to be increased by the Government. He offers 70%-90% of the market value of the ornament depending on the risk involved. The money is lent for a maximum period of 2 years after which 3 notices (notices contain Legal Seal of the local post office) are served to the borrower for repayment. If a borrower defaults even after the 3 notices and is not able to repay the full money, the ornament gets confiscated and is then sold in the open market to recover the outstanding amount. The full amount including interest charges are required to be repaid at the end of the agreed period and no intermittent amount needs to be repaid. He pays his income taxes accordingly every year. Moreover, this business has grown and hence does not require much of an investment now making it a very profitable business though with its own risks.

Artificial jewellery

8. Risks                           : There are certain cases where the ornaments may be stolen ones and hence this lands him in trouble as he loses his lent money. As cited by him, he encounters  5% of such cases every year. Moreover, there are certain defaulters as well, but it was really good to know that most of the customers pay back the money and only less than 1 % of customers default. 

9. Network                      : Pawn brokers like him can be seen scattered around Mahabalipuram, Chengelpet and in other nearby areas which proves to be very helpful to arrange for cash through them when he himself does not have enough cash to lend in short time.