Window on Eurasia: Russia’s New Growth Industry – Pawnshops

Paul Goble

Tallinn, November 13 – As the economic crisis has deepened in the Russian Federation, many sectors – such as restaurants, high tech and furniture outlets, and clothing stores – have seen their sales decline as Russians tighten their belts. But others– such as pawnshops -- have actually seen their business boom, as people attempt to find the means to make ends meet.
Writing in “Moskovsky komsomolets” this week, Eva Merkacheva reports that the number of restaurant patrons has fallen by about 10 percent, somewhat more in high end establishments and somewhat less at more moderately priced ones, a pattern she says is repeated elsewhere in the consumer economy (www.mk.ru/blogs/MK/2008/11/10/society/380184/).
But there are two kinds of business, she continues, that are doing even better than they were before the economic crisis began to spread: stores selling home improvement materials which people are patronizing at slightly greater rates “before things get even worse” and pawnbrokers, the traditional resort of those down on their luck, where the lines are growing.
In recent weeks, Mikhail Unksov, the president of the Russian Pawnbrokers League, told Merkacheva that the number of patrons of such establishments has increased by 12.5 percent. In cities like Moscow with more than a million people, that number has gone up 20 percent; in smaller cities, 30 percent; and in rural areas, which often don’t have pawnshops, much less.
During the last month alone, he continued, pawnbrokers in the Russian capital have given out approximately one billion rubles (40 million U.S. dollars) in exchange for tings pawned. Ninety percent of this is for jewelry, three percent for automobiles, and “all the rest: for video equipment, mobile telephones, and the like.
An employee at one of the Moscow pawnshops said that people are selling expensive things they have purchased on credit and can no longer make the payments. Such people, she added, have “too great expectations” about what their goods will bring, and when the pawnbrokers can’t sell them, they often become “hysterical.”
Patronage of pawnshops, of course, is not a perfect indicator of just how difficult things have become for many, but it is a useful and even objective measure of what many Russians are now being forced to do to try to maintain their standard of living as they see their incomes drop or even lose their jobs.
That is clearly Merkacheva’s message. And she ends her article with the results of a poll which suggests that what she describes as Russian “belt tightening” is going to continue for some time: Fifty-six percent of Russians say they are cutting back on entertainment outside the home, and 48 percent plan to reduce purchases of high tech equipment.
In that environment, pawnshops are likely to be a major growth industry, although like many others that highlight the difficulties Russians face now, it is not one that the Kremlin and its supporters are likely to point to frequently or with pride.