The pawnshop industry is a business which is surrounded with a lot of stigma and perceived as a shady business. Many people do not have confidence in this industry as they believe it is a dodgy industry which is full of con men who are out to take money away from them. Pawn shops originated 3 000 years ago in China as a means for struggling peasants to get cash. The pawn brokers would hold items of value for a certain amount of time until the loan had been paid back together with the agreed interest charged. Pawn shops mainly specialise in buying and selling goods for cash ranging from diamonds, jewellery, gold and anything of value. Pawnshops also offer quick loans which are payable within 30 days.
In South Africa legislation has been amended in line with the constitution allowing companies to run legal pawn businesses in a regulated environment. The National Credit Act 34 of 2005 “NCA” regulates pawn shops and it is a requirement that pawnshops have a National Credit Regulation licence. The NCA states that pawn brokers that have at least 100 agreements in their books and with a total outstanding principal debt owed to them under pawn agreements exceeding R500 000 must register with the NCR. Failure to register may lead to a fine of R100 000, 00 or imprisonment of up to 10 years.
The NCA regulates the process in which pawnbrokers are supposed to operate so as to ensure that the consumer is protected. The second hand dealers and Pawn Brokers Act 1996 regulates the activities of pawn shops. This act requires that pawn brokers setting up a business must notify the police and must be registered with the board for second hand dealers and pawn brokers. The act further required that pawn brokers keep detailed records of all transactions and they must notify the police if they suspect that the goods have been stolen. Pawn brokering is the business of lending money at an interest on personal, movable property deposited with the lender until redeemed.
The economic climate in South Africa has seen a dramatic decline in consumer’s disposable income and the requirement for an institution that can not only bridge financial gaps but also provide a platform to purchase any item of value and provide instant cash to consumers in need. The pawnshop industry is booming in that consumers are able to access quick loans. The collateral handed in is used to determine the consumer’s affordability to repay the loan. These loans are accessible to everyone and they are not for a particular class. When applying for a loan there must be collateral which must be handed in to the credit provider so that in the event that the consumer fails to repay the loan the collateral is sold so as to get the money owed. This guarantees the credit provider that they will get their money back and this has resulted in the growth of pawn shops in the country. The pawn shop business is booming in South Africa as it is stated that there are more than 15 000 pawn shop pawnbrokers. This further showing that the business is profitable as more and more entrepreneurs are venturing into this business.
When starting a pawn shop it is advisable that you have sufficient capital. This will assist in that the capital that remains after the start-up costs will assist you to begin building a solid pawn loan base and also to operate with a negative cash flow and minimal profits for several months. Many consumers are attracted to pawn shops by the quick loans that they are able to access so having a strong loan financial base will assist. There is need to have sufficient knowledge and tools to test and identify precious metals and gem stones. Attending trainings and research will assist in ensuring that one has sufficient knowledge for this type of industry.
Market Research will need to be done so as to learn more about the industry you want to venture in. It is important to know the kind of market you want to attract and develop a marketing strategy that will attract the class of people you want and keep them coming back. When operating such a business it is important to know the regulations that regulate the business and ensure that you are compliant with the requirements of the regulations, for instance the National Credit Act 34 of 2005 and the Second hand dealers and Pawn Brokers Act of 1996.
Research can be done through researching on the internet or physically visiting different pawn shops and observing how they operate their business and this could assist in building business contacts. The research will clear up any misconceptions and irrational expectations you may have. It is important to prepare for hard times on the cash flow as all businesses go through hard times. Due to the type of business it is important to have maximum security so as to safeguard your goods and the lives of your employees.


AUTHOR: Noma Dube


  1. Mtimkulu  June 22, 2017 at 9:45 am

    Not at the moment.

  2. Fanie  June 30, 2017 at 1:05 pm

    Is the pawn shop industry regulated on the max interest they can ask per month on a pawn?

  3. Et  November 2, 2017 at 8:13 am

    Where do I start to get pawn shop license…

  4. Elmarie van der westhuizen  January 15, 2018 at 4:42 am

    Need to obtain a pawn license can you assist in getting one
    call me 0833009350

  5. moo  January 19, 2018 at 9:08 am

    hi i have a worry wanted to start secondhand shop in umlazi from home i wanted to be legal i know all the procedures and doing books as i have been working for q10 years to my suprise cant get licence because municipality wont grant business right to township houses i have no money to rent premises what shoul i do

  6. M N Aphane  February 13, 2018 at 1:41 am

    I Want to apply a pawn for Cash licence please hulp. Regards Nico Aphane 0712985559

  7. JT  March 12, 2018 at 9:07 am

    Pls advice, a ring to the value of 30 000 where pawned for an amount of 2500, payments were made as agreed for the past 6 months as the person could not afford to pay the lump sum back, for 6 months she has paid 700, due to her circumstances she offered the pawn shop an additional 1000 rand to get her ring but to no avail she has paid back the loan amount twice and was willing to offer an additional 1000 which will bring the total sum paid to 5200, to me this is unlawful and she will be paying 700 until she is able to payback the lump sum, the collateral is there to ensure the pawn shop has enough equity for the loan if you dont pay the loan they sell the ring, so why must this lady carry on paying 700 a month until she can get the lump sum this is ludicrous and a total rip off

  8. Atwell Walsh  July 5, 2019 at 7:09 am

    Can anyone help me.
    I cannot obtain a loan from the bank.
    I urgently need an amount of R6500.
    I am prepared to use my vehicle as collateral. (Value: R70.000.00) PT CRUISER 2006 Model.

    My contact number: 0711792119

  9. Brandon  July 20, 2019 at 5:07 pm

    Good day guys

    How do I go about becoming a pawn shop owner or buying and selling goods, can someone please help me with the procedure

  10. danny  July 31, 2019 at 7:22 pm

    hello everyone i need to know how where to register for pawn shop licences

  11. Leatitia Du Toit  October 20, 2019 at 5:39 am

    How does a pawn shop decide how much they can borrow on your item is there any guideline as to what an item is worth what percentage of the value they pay?

  12. Willson  December 20, 2019 at 3:54 pm

    Hi can I please get some help on what do I need to do to start a pawnshop in south Africa

  13. Arkady  January 12, 2020 at 11:51 am

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    Short Course, Great Profession! Learn From The Best How To Manage Your Own Auction / Pawn Brokerage Business & Become Financially Independent. Course Dates 27 – 31 January, 2020. Limited Space Per Class. Registrations Are Now Open, Register Online: Or Call Us On 0123723710 / 0723854770 / 0825774439

  14. Shantel  January 28, 2020 at 3:33 pm

    Hi what can I do when my personal profile and items I’ve pawned was discussed with pub

  15. Shantel  January 28, 2020 at 3:35 pm

    Public for resell?
    One of the employees did this so the person who wanted to buy contacted me because for my luck we know each other

  16. Thabang  July 11, 2020 at 8:04 am

    Please help me to obtain a pawn shop licenses in Johannesburg

  17. Joelene  July 18, 2020 at 9:39 am

    is it ussaul for a pawn shop to ask 40 % rent on oawned item as far as i know i think the highest is 30%

  18. VN MBOKAZI  August 17, 2020 at 10:12 am

    what documents i need to open pawn shop? where can i start?

  19. Luyanda  December 8, 2020 at 3:47 pm

    I need assistance with applying for the NCA licence for a pawn shop

  20. Lee Badenhorst  October 20, 2021 at 8:18 am

    Good day

    I had goods at a Cash Converters and the goods where stolen and the where goods that can’t just be replaced as some of them the goods where vintage Zippo lighters and goods bought from overseas.

    Cash converters said the they will pay fair market value but im concerned that they not going to pay me what the goods cost.

    My loan was for R5000.00 and the cost of the goods where well over R100k but I put a claim in for approximately R75k.

    What do I do next as I’m worried that between them and the insurance company I’m gonna get stiffed.

    Please assist with information and or any help.

    Thank you


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