This article first appeared in The Edge Malaysia Weekly on December 8, 2025 - December 14, 2025

FOR more than three decades, Lina (not her real name) kept her gold jewellery, bought when the precious metal was just RM28 per gram, tucked away. This year, however, soaring gold prices and a need for quick cash pushed her to visit the pawnshop.

“With gold prices now so high, I can walk into a pawnshop and get 70% to 90% of the spot value immediately. Even if I don’t redeem the items later, the gain is still substantial,” she tells The Edge.

Gold traded around US$4,204 per troy ounce last Wednesday, up 58.2% year to date (YTD), fuelled by a combination of factors such as geopolitical tensions, concerns over the US economy and shifting US tariff policies.

A quick check with local jewellery retailers shows that the precious metal is now priced at around RM640 per gram and spot gold price of US$134.88 (RM555) per gram. This means Lina’s 30-year-old purchase has appreciated by more than 21 times.

Lina is one of many Malaysians who are contributing to increased foot traffic at pawnshops across the country, as consumers seek fast cash while capitalising on the rally. Higher gold prices have also inflated the value of pawn collateral, widening loan sizes and driving activity in a sector often seen as one of the most traditional forms of moneylending.

Despite its old-world image, pawnbroking continues to serve customers who prefer gold or luxury goods as store-of-value assets or who lack access to conventional banking credit. Depending on the item, pawnbrokers typically lend up to 80% to 90% of market value.

Under Malaysia’s Pawnbrokers Act 1982, each pawn ticket is valid for six months, with monthly interest capped at 2%. Customers can redeem their pledged items by repaying the principal or rolling over the ticket for another six months. Revenue for pawnbrokers comes from these interest charges and from auctioning unredeemed pledges.

However, it raises a broader question: are rising pawn transactions merely opportunistic plays on record gold prices or a sign that financial pressures are tightening for Malaysian households?

The current gold rush is already showing up in corporate earnings of publicly listed pawnbrokers, namely, Well Chip Group Bhd (KL:WELLCHIP), Pappajack Bhd (KL:PPJACK) and Evergreen Max Cash Capital Bhd (KL:EMCC). EMCC, which operates pawn services and trades in gold and luxury goods, posted a 35.6% jump in profit to RM25.75 million for the nine months ended Sept 30, 2025 (9MFY2025) from RM18.99 million a year earlier.

Revenue for the period surged 78.4% to RM145.35 million from RM81.49 million, driven by higher pawn loan disbursements and increased sales of unredeemed gold items.

A market observer points out that the pawnbroking industry had demonstrated resilience, long before the latest gold rally supercharged pawn loan values and foot traffic.

“There is always steady demand for pawnbroking services, especially from those who need short-term cash flow, such as food and beverage operators, small business owners and micro traders. Default rates are relatively stable, typically below 10%, and loans are fully secured with gold collateral,” he adds.

Still, a natural question hangs over the sector: what happens if gold prices tumble? The market observer says the risk is lower than many assume. “If you look at the movement of gold prices since 1990, there has never been a sudden drop. But some pawnbrokers offer as low as 60% of gold spot value as a form of risk mitigation.”

He adds that larger pawnbroking firms stand to gain more in the current liquidity-tight environment. “A larger pawnbroking company has the financial capacity to serve more customers compared with smaller, family-run shops.”

EMCC executive director and group managing director Datuk Low Kok Chuan says while soaring gold prices have lifted loan values this year, they are not the group’s main driver of profitability. He notes that pawnbroking demand has grown consistently through economic downturns because it provides fast, collateral-based financing without the burden of long-term debt.

“The sector’s earnings are structurally supported by its lending model, not solely by gold price movements. Pawn loans are issued at about 85% of the pledged gold value, which creates a built-in buffer. If a customer does not redeem the item, it is sold promptly, limiting exposure to price volatility.

“More importantly, the bulk of industry earnings comes from the pawnbroking segment, where service charges are fixed and regulated. These charges are not affected by short-term fluctuations in gold prices. As long as gold prices remain stable at a healthy level, profitability should remain consistent,” he says.

EMCC’s year-to-date default rate is around 6.5%, which Low views as manageable, given the fully secured nature of the business. Under regulations, operators do not pursue customers for any outstanding balances. Instead, unredeemed items are simply auctioned or sold to recover costs, and the valuation buffer typically prevents losses.

In terms of demand growth, Low says pawnbroking services are driven largely by Malaysia’s growing underbanked population.

“In Malaysia, more than one in five adults are unbanked. These include individuals without access to conventional banking facilities, gig workers, micro-entrepreneurs, bottom 40% income households, and foreign workers who require quick, short-term liquidity. Many are long-standing repeat customers who rely on pawnbroking as a safe and transparent form of short-term financing,” he explains.

EMCC’s stock has not mirrored its earnings momentum. Its shares have been flat over the past year and are down 5.5% YTD to 34.5 sen as at last Wednesday’s close, valuing the group at RM386.6 million. The stock trades at a historical price-earnings ratio (PER) of 12.88 times.

Rival Pappajack has reported a similar uplift. The company’s net profit for 9MFY2025 rose nearly 20% to RM21.35 million from RM17.81 million a year ago, driven primarily by its pawnbroking operations.

Managing director and CEO Jack Lim says 72% of group earnings come from the core pawnbroking segment, with the sale of unredeemed or bid pledges contributing the remaining 28%.

“The primary driver of our profitability is our ability to generate and maintain a healthy volume of pawn loan transactions. Higher loan deployment directly translates into higher interest income, which is the cornerstone of our pawnbroking business model,” he tells The Edge.

Lim points out that Pappajack has never recorded a loss on the sale of unredeemed or bid pledges.

“Our default rate ranges between 8% and 12%. However, our prudent lending practices effectively mitigate credit risk exposure.

“We primarily accept gold jewellery as collateral, with loan margins of 80% to 90% based on the prevailing gold spot price. Given that gold prices have demonstrated stable to upward trends, we are able to fully recover both principal and accrued interest through the sale of unredeemed and bid pledges for defaulted transactions,” he adds.

Pappajack’s shares have slipped 6.7% over the past year, closing at 91 sen last Wednesday and valuing the company at RM694.3 million.

Meanwhile, Johor-based Well Chip has been drawing heightened investor attention this year. Its shares have surged 37.7% to RM1.57 as at last Wednesday’s close, valuing the company at RM942 million and putting it at 12.17 times historical PER.

It is also the only listed pawnbroker with analyst coverage. Maybank Investment Bank (Maybank IB) initiated its coverage in February with a “buy” call and a target price of RM1.39 per share.

In its latest update on Nov 25, the research house reaffirmed its bullish stance and lifted its target price for Well Chip to RM1.83 per share, citing stronger earnings expectations.

“We revise our FY2025, FY2026 and FY2027 net profit by 5.3%, 5.9% and 4.8% respectively to reflect higher total pawn loans disbursed as firm gold prices encourage customers to redeem their pledges, freeing up cash for new loans; and a higher blended gross profit margin of 52% to 53% (from 50% to 52% previously) as the pawnbroking business typically commands higher margins over its retail and trading business,” Maybank IB wrote.

“We continue to like Well Chip for its growth prospects, underpinned by a resilient demand for its services and its gold-backed model,” it added.

However, the research house flagged several risks to its earnings estimate: gold-price volatility, cybersecurity threats, unlawful and suspicious pawn transactions, cash capital requirements that may impact growth, and physical security risks as Well Chip is involved in the safekeeping of cash and valuables.

For 9MFY2025, Well Chip reported a 77.1% year-on-year surge in net profit to RM61.88 million from RM34.95 million a year earlier. Revenue climbed 17.95% to RM196.32 million from RM166.44 million.

With earnings accelerating, all eyes are now turning to the key variable underpinning the sector’s momentum: whether gold’s hot streak will extend into next year. 

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