Cold Cash Quick

A young man, the hood of his dark blue sweatshirt drawn low over his face, steps out of a crowd of holiday shoppers and approaches a non-descript store front. He steels a quick look at the people around him before entering.

“I’m pretty broke at the moment,” he says. “I only get €600 ($800) unemployment money and after paying a couple of bills, the electricity and everything, not much is left at the end of the month.”

Half of the man’s unemployment payment goes to paying rent. After that, things get tight. He’s tried applying for more credit from his bank, but they’ve already rejected him once. The only option he has is one many Germans are still too embarrassed to admit: the pawnshop.

But sometimes the trip to the local pawnbroker is the only solution, the last resort for the cash-strapped, and although they may not be proud of it, many more Germans in need of a quick cash fix are turning to the shops.

Jewelry, technical appliances, even cars -- they can all be deposited at the pawnshop in exchange for a short-term credit. For about three months, those in need of cold cash can fill their pockets before they have to pay back their credit or forsake their possession.

Booming business

In Germany, there are around 200 such shops. During the last two years of economic downturn, surging unemployment and increasing prices, pawnshops have experienced an unprecedented surge in business. Profits are up by more than 25 percent. In the last year alone, Germans borrowed €480 million from pawnshops.

Klaus Bode, owner of a pawnshop in the town of Siegburg near Cologne, says that unlike colleagues in retail he can’t complain about poor business this year. When the whole economy is in the rut and everyone’s complaining about how expensive things are and how consumer spending is on the decline, Bode is enjoying a booming business.

And not all of his customers are unemployed or living from welfare. The owner of an upscale women’s clothing boutique in Cologne, for instance, refers to the pawnshop as her “silent credit union.”

She frequently brings exquisite jewelry to Bode in return for a credit of anywhere up to €25,000. That money is used to help keep her shop running during slow sales periods. “The pawnshop is an uncomplicated means of refinancing,” she says, without which she probably would have to lay off her employees.

The uncomplicated banker

Bode understands that many of his customers turn to him after they’ve failed to get the necessary credit from their bank. He says a pawnshop offers its customers several advantages over a normal bank credit. There is no extensive application process to delay transactions; he hands out the cash immediately.

“Banks always leave customers with the impression that they have to beg for money and then be grateful if they actually receive it. They always give customers the once-over: what do they earn, what do they want the money for. The customers have to answer all kinds of uncomfortable and sometimes very personal questions. Pawnshops just ask for the necessary security, hand out the money and leave the personal affairs outside.”

As for those customers who fail to repay their credit plus the one-percent interest per month and a three-percent fee for storage, Bode says he doesn’t lose out on that much. If they don’t come back, he auctions off their deposited possession -- at a higher rate than initially paid, of course. But that happens comparatively seldom: only one in every 10 customers fails to return to reclaim their possession. The Germans aren’t that poor after all.