Lamna Financial's 94% loan payout growth: How pawnbroking is filling the credit gap

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This growth underscores the increasing reliance on alternative financing options, as the South African Private Sector Credit Extension (PSCE) index slows from a three-month high.

South Africa’s private-sector credit increased by 3.5% year-on-year in July 2024, slowing from a three-month high of a 4.27% rise in the previous month. This marked the 37th consecutive month of growth in private credit albeit the lowest level since February.

Charles Meyerowitz, chief executive officer of Lamna Financial, attributes this surge to the growing challenges individuals and businesses face in securing traditional credit.

"While the PSCE index indicates some recovery in private-sector credit growth, the reality is that many South Africans still find it difficult to access traditional forms of credit. The process is often cumbersome, and the criteria are stringent, leaving many without the funding they need in a timely manner," says Meyerowitz.

“The Lamna High-End Pawnbroking Index (LHPI) aims to track trends and movements in the high-end pawnbroking market,” he adds.

“It will serve as a barometer for the luxury asset-backed lending market, providing valuable insights across various high-value categories, offering a clear picture of market dynamics in a rapidly evolving landscape, illustrating how luxury goods are being leveraged to meet financial needs.”

Unlocking luxury assets

Meyerowitz further explains that asset-based lending offers a quicker and more accessible alternative for those looking to unlock the value of their high-end assets.

"We've seen a marked increase in clients utilising their luxury items, such as watches, cars, and jewellery, to secure loans. This trend reflects a broader shift in how individuals are managing their finances in a challenging economic environment."

Despite the rise in private-sector credit growth, the increasing number of South Africans turning to pawnbrokers like Lamna Financial highlights ongoing difficulties in the credit market.

"The staggering 94% year-on-year increase in loan payouts, alongside a 61% rise in the number of deals completed compared to this period last year demonstrates that the demand for our services is a clear indication that the traditional banking sector is not meeting the needs of many borrowers, particularly those who require immediate liquidity," Meyerowitz adds.

Recent statistics from the South African Reserve Bank indicate that while credit extension to the private sector has improved, the overall lending landscape remains difficult, with many consumers and small businesses still struggling to meet the stringent requirements of traditional financial institutions.

This environment has contributed to the growing popularity of asset-based lending as a flexible and accessible means of financing.

"While private credit growth is a positive sign for the economy, the reality is that many individuals still face significant hurdles in securing conventional loans,” he says. “Pawnbroking offers a distinct advantage in this regard by providing immediate access to funds without the need for lengthy approval processes.

“Pawnbroking is no longer seen as a last resort,” Meyerowitz adds. “Our index is indicating that for many it is a preferred method of accessing quick funding.”

"The Lamna High-End Pawnbroking Index (LHPI) is part of a broader strategy to shed light on this often-overlooked sector and reinforces our position as a trusted partner in the alternative finance space,” he says.

“Our growth in the last year, underscores the critical need for alternative lending solutions in the South African market, particularly as individuals seek ways to unlock wealth and access necessary funds without the burden of traditional credit constraints.”