The history of pawnbroking is probably as old as trade itself. Pawnbroking was well-established in Ancient Greece and Rome, and even earlier in China.

Here we consider the history of pawnbroking and how it has evolved (and is continuing to change) in the modern world.

Jump to a section of interest:

• pawnbroking in ancient times
• evolution in medieval Europe: from church pledges to state pawn shops
• the history of pawn shops in South Africa
• pawnbroking in modern times
• the scope of asset-based lending today.

Pawnbrokers in ancient times

The first written records of pawnbroking date back to the 5th century in ancient China, when pawn brokerages were established and operated in the Buddhist monasteries. Later, the practice became more widespread.

Pawnbroking was also common in Ancient Greece and Rome. In fact, most modern laws surrounding pawnbroking derive from Roman laws.

Pawnbroking in the European Middle Ages

Private pawnbrokers were common in medieval Europe. Early usury laws prevented institutional lenders from charging interest in most European countries. However, private pawnbrokers were often exempt from these laws.

Private pawnbrokers were at times tolerated and other times banned or even persecuted by both the church and state.

Nonetheless, the church and various states were, at some points, directly involved in pawnbroking transactions themselves.

Medieval church involvement in lending funds for interest

As early as 1198 in Germany – as well as in 1350 in France and 1361 in England – the Church established “mounts of piety”. These were charitable organisations that lent money to the poor, without interest, in return for pledges to the same value.

A similar pledge system was established in medieval Italy.

These systems ultimately failed due to lack of funds – leading the Vatican to allow them to charge interest (and even to sell the pledges of borrowers who couldn’t repay the loans).

Controversy over the ethics of charging interest was settled by Pope Leo X, who declared the pledge system a lawful and valuable institution and threatened dissenters with ex-communication.

Medieval state involvement in pawnbroking

According to a 1911 Britannica Encyclopedia article, Charles Borromeo – Archbishop of Milan from 1538 to 1584 – counselled the establishment of state pawnshops.

Church acceptance paved the way for greater state involvement, with public pawnshops opening in Italy and, eventually, many other European countries.

In England, the early pawn industry was operated mostly by Jews. With mounting persecution and the eventual expulsion of the Jews from England in 1290, French traders – particularly Cahorsins and Lombards – took over much of the trade.

Even the royals turned to pawnbrokers in England.

Edward III pawned royal jewels to raise funds for England’s war with France in 1338, and Henry V did the same in 1415.

By the 1600s, the pawn industry was firmly established across much of Europe.

Early pawnbrokers in South Africa

In South Africa, pawning goods as a way to secure loans can be traced back to colonial times.

Pawn shops that offered loans against jewellery, watches, tools and other comparatively small personal items of value existed in colonial Cape Town, and in other smaller cities and towns.

As this report notes, the first pawn laws in the country were promulgated in 1889 by the then Governor of the Cape of Good Hope.

During South Africa’s days as a Union and its early years as a Republic, laws mostly empowered municipalities to regulate the operation of pawnbrokers. (These laws were later repealed).

Evolution of pawnbroking in modern times

In modern times, pawnbroking has evolved from just lending against smaller physical assets such as gold and jewellery to accepting increasingly specialised forms of security.

These days there are lenders that will accept business invoices that are awaiting payment, commercial property and high-value assets such as luxury vehicles as collateral on a loan.

This has helped this type of lending move away from the once negative stigma of pawn shops into what is now known as asset-based lending, which is a multi-billion-dollar industry worldwide.

The concept is also evolving online. Lending-as-a-Service (LaaS) platforms are gaining popularity as borrowers seek out faster, cashless and paperless loan options online.

Lending online also allows digital assets to be considered as security or collateral on a loan, including NFTs and cryptocurrencies.

Just how big is asset-based lending today?

Asset-based lending is one of several modern forms of pawnbroking. This type of lending has long since grown beyond its humble origins and is now a massive industry all around the world.

In the UK, asset-based lending (ABL) advances increased by £1.6 billion (8.7%) between the first quarter of 2022 and June 2022 to reach a total of £20.7 billion.

The numbers are equally impressive in the United States. In the first quarter of 2021, the volume of ABL lending totalled $26.7 billion. That’s a whopping 67% increase from the same period in 2020.

How Lamna fits in

In South Africa, Lamna occupies a niche in the asset-based lending industry, offering loans against high-value personal assets. We accept a range of assets, such as vehicles, artwork and luxury watches, as collateral for short-term loans.

Apply online for an asset-based loan or contact us on 086 111 2866 for more information about getting an asset-based loan in South Africa.