BANKS could be intimidating, which could well be one of the factors why the so-called unbanked sector in our society remain so. And which is also why the popular pawnshop chain Cebuana Lhuillier has focused the past 10 years on building better relationships with its target market, and catering to their needs as the poor man’s bank.
After all, banks are not exposed to any more risks than pawnshops are, and Cebuana Lhuillier President and CEO Jean Henri Lhuillier thinks that pawnshops could actually be taking more risks than the banks. That exposure is testament to the stronger relationship built on trust, and that sense of loyalty between pawnshops and their clients.
Thus, Cebuana Lhuillier takes pride in its role in “bridging the gap” the banks are unwilling to fill in terms of providing credit access to people who only have personal items that banks are averse to taking as collateral for loans.
Lhuillier believes that the poor make smart decisions with their money, but are not given the proper access to credit, helping make them even wiser in their financial decisions.
“I feel that the poor don’t make dumb decisions. They just don’t have access to make the right decisions. But if you give them the right products, the right services, then they make smarter decisions,” he said.
To provide the poor with this access to capital, Cebuana Lhuillier is looking at ways to provide loans for its clients up to a certain amount, even without collateral.
Lhuillier said he feels he could take such risks, because he believes pawnshops know their clients more than the banks do. With this knowledge, Cebuana Lhuillier can take more risks in extending credit to trusted clients.
“The advantage that pawnshops have over the banks is that pawnbrokers really know their clients more because of the interaction between the front liners and the clients. You can have this interaction in private banking, but I don’t think they can have that set up on a day-to-day basis. Which is why pawnbrokers really know their clients more, and the relationship that they build with their clients is a more solid relationship,” he said.
Without a credit-information database in place yet in the Philippine financial system, the banks and other financial intermediaries are forced to have their own system of rating the creditworthiness of their clients. Cebuana Lhuillier also has its own credit database that helps it assess risks.
“Aside from the higher risks that we take, we already offer the highest loan appraisals. That, in effect, is already a risk. Our business is creating loyalty with our client, which is why we try to find ways to increase that loyalty,” Lhuillier said.
To increase loyalty from its target market, a pawnshop business also has to be dynamic so it can evolve with the times. Aside from the pawnshop business, Cebuana Lhuillier had also established itself in the remittance business, both locally and abroad, applying still its motto of providing better customer service so that—as its advertisement campaign says—the remittance service would be as if the money was personally delivered by the recipient’s loved one himself.
Lhuillier said that since the 1980s, even before the money-remittance service was introduced, Cebuana Lhuillier already catered to overseas Filipino workers (OFWs) by giving them access to capital they needed, using gold jewelry purchased from Saudi Arabia as collateral for loans. Now, as more Filipinos abroad require remittance services, the company looks for other ways to help, including providing the service at the lowest fee possible.
Recently, Cebuana Lhuillier launched its first office in the Middle East at the Dubai Multi-Commodities Centre, providing service and marketing support for its clients and corporate partners in the region. Cebuana Lhuiller operates in the Middle East through a network of remittance partners, including Al Ghurair/Ersal and Al Fuad, which are among the biggest companies in the United Arab Emirates.
Aside from the higher appraisal rates and the remittance service, Cebuana Lhuillier had also been active in its campaign on financial literacy for students.
It has partnered with the Department of Education to provide for the Alternative Learning System (ALS) that teaches financial literacy to public-school students so that they can make even smarter decisions when it comes to handling money.
Currently, there are 16 ALS centers throughout the country, and Cebuana Lhuillier plans to increase this number to 64 this year.
Cebuana Lhuillier also offers microinsurance products to its clients, mostly to protect against natural disasters and personal injuries, which lead to loss of property and income, as a way to help its clients in times when they need help the most.