Cebuana Lhuillier Pawnshop: In the business of lending

MANILA, Philippines - For most Filipinos, banks are useless as far as their need for cash is concerned. The country’s largest pawnshop chain saw this as an opportunity. "The pawnshop business has been very competitive since there is real demand for financial services that can provide funding to regular Filipinos who do not have access to banks and other lending institutions," said Jean Henri D. Lhuillier, who manages the Cebuana Lhuillier Pawnshop Companies. He noted that unlike banks, which require a number of documents before lending money, pawnshops require only a valuable item for the loans to be given. It was for this reason that the company set up thousands of pawnshop outlets nationwide and has been recognized as one of the largest pawn brokering chains in the world. About 60% of Cebuana Lhuillier’s outlets are based in the National Capital Region, while the rest are scattered all over the country, Mr. Lhuillier said. "Our business is out there as a bridge financing service. We are not into the business of buying. We are in the business of lending," he said. The company plans to bring its pawnshop business to other countries in Southeast Asia. Mr. Lhuillier said the company has started its pilot testing in Vietnam, but would not start operations until after six months. Nevertheless, the pawnbroker said there is still room for expansion in the Philippines and the company is in fact growing by an average of 3% to 5% a year. "As a businessman and as an entrepreneur, you have to rely on your experience, and our expertise lies in the Philippines," Mr. Lhuillier said. "I look at us as a financial service provider that people who are in dire need of money can go to. Cebuana is like a bank without the fuss," he added. Like most banks, the company also offers remittance service, nonlife insurance and bill payments. "In less than 10 minutes, you get your cash. We don’t have credit risk issues and you only lose your jewelry or whatever item you pawned," Mr. Lhuillier said, adding that in his type of business, there is no risk of a loan default, which today still affects banks with a big cache of bad loans. This is the secret formula of the company, which started as four pawnshop outlets in Metro Manila in the mid-1980s. Cebuana Lhuillier traces its roots to Cebu. There, French Consul to the Philippines Henry Lhuillier established in 1935 his first of a chain of "Agencias." He later opened several more branches in Cebu and nearby provinces. In 1968, Henry Lhuillier’s son Philippe Lhuillier opened the first Lhuillier pawnshop at Libertad Street in Malibay, Pasay under the trade name Agencia Cebuana. The company then pursued its expansion in Northern, Central and Southern Luzon. Soon, branches were set up in the south, mainly in Davao, Cagayan de Oro and Bukidnon. In 1987, the company expanded nationwide and adopted the name Cebuana Lhuillier, catering to the needs of more than 15,000 customers a day. It was incorporated as PJ Lhuillier, Inc. in 1989, with Phillippe Lhuillier as principal stockholder. In the 1990s, Cebuana Lhuillier continued to dominate the pawnshop industry, growing to over 300 branches nationwide and making it a household name for many Filipinos. A third generation in the pawnshop industry, Mr. Lhuillier said his company’s advantage lies in its wide network and his knowledge of the industry. "The company has tried to perfect the business. I have created a level of customer service that is not seen today in [other] pawnshops," he added. He noted that unlike the pawnshop that his grandfather first built in 1953, Cebuana Lhuillier now boasts of professional managers that help run the business. Mr. Lhuillier describes the pawnshop now as "a professionally run company that is owned by a company." Today, the company has ventured into other businesses. Aside from pawnbrokering, PJ Lhuillier has formed Cintree Management Services, Inc., a management company that provides human resource, information technology, legal, finance, operations, marketing and administrative management services to the PJ Lhuillier Group of Companies. Another milestone reached by the company was the establishment of the Cebuana Lhuillier Rural Bank in Cavite in 1998, which provides financing to small and medium enterprises. Mr. Lhuillier also holds various positions in Cebuana Lhuillier Rural Bank, Just Jewels, Le Soleil de Boracay Resort and Global Restaurant Concepts, the franchise holder of California Pizza Kitchen-Philippines. Meanwhile, Cebuana Lhuillier Services Corp. (CLSC) is in charge of managing the ancillary services and products being offered at all Cebuana Lhuillier Pawnshops such as its money remittance service Pera Padala. Pera Padala is the money remittance service aimed at a sizable segment of both local and international markets. Cebuana Lhuillier’s present standing can be traced to standards of financial stability, customer and employee satisfaction, and market reach that Mr. Lhuillier has strived to meet. The businessman wants his company to become the benchmark in customer service in the pawning industry. "Perhaps one of the reasons why pawnshops are perceived negatively in relation to banks is that [banks] are considerably ahead in terms of customer service," he pointed out. At present, Cebuana Lhuillier has taken steps to remedy this by providing hotlines for customer feedback.