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FOREIGN A survey of the related literature supports the notion that the financial system plays a vital role in supporting the growth of the economy (Beck et. Al., 2000; Levine, 1997; King and Levine, 1993; McKinnon, 1973; Shaw, 1973; and Schumpeter, 1911). For this to work, the financial system must provide a complete range of products and services to meet the different needs of all strata in the economy by expanding the financial base of society and preventing financial exclusion. Therefore, informal credit institutions such as pawnshops are recognized as providing loans to those in society that are excluded from mainstream bank loans. Operating side-by-side with the mainstream financial sector, but largely ignored, the pawnshops as part of the informal sector are significant in providing credit finance, particularly to low-income groups and in areas where mainstream institutions are hampered by bureaucracy (Chan and Owyong, 2007). In the context of development, Caskey (1994) emphasizes the importance of pawnshops as „banks for the poor‟. He elaborates that pawnshops have a high outreach, are often financially viable, and have several advantages; compared to other informal market institutions, clients are not expected to fall into long-term indebtedness. Moreover, it reduces the risk of a pawnbroker to provide loans to poor people, and monitoring is not necessary. Although pawnshops have grown in importance and influence part of the population in various societies, there is still a lack of research regarding these important informal credit institutions. In other words, despite the flourishing business, the theoretical and empirical studies of pawnshops are very limited. The following studies are some of the earlier studies in the U. S. among the little available literature: Patterson (1899a and 1899b), as a comparative study, investigated American and European pawnshops, Levine (1913) provides an extensive description of the pawnbroking business, and Nugent (1939) estimates the total pawnshop credit (Caskey, 1991: 86). Since then,there has been no serious study of pawnbroking in the United States due to the limitation of data and statistics on this forgotten institution and a lack of academic studies on pawnshop operation (Caskey, 1991). Until 1990, Caskey, who is known as “the founding father of research in this field” (Johnson and Johnson, 1998: 31), explored the role of the pawnbroking industry in providing credit to consumers excluded from mainstream credit markets in the United States. This was followed by Caskey (1991, 1994 and 2005), who looked at the importance of pawnbroking in the United States economy; Oeltjen (1996), who studied the history and regulations of pawnshops; Bienkowski and Davis (1997), who studied the characteristics of the pawnbroking industry and regulatory policies, particularly in Victoria states; Johnson and Johnson (1998) who described the profile of pawnshop customers; and Francis (2007) who explored the characteristics of pawnshops as retail and stolen goods trading. Meanwhile, in Britain, research on pawnbroking received less attention and mainly focused on the historical development of British pawnbroking through studies by Hows (1847), Hudson (1982) and Tebbutt (1983). In contrast, with pawnshops being common in much of Asia compared to the developed countries, more attention has been given to their role as a short term lending solution for consumption purposes and as microcredit for small and medium businesses.…...

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