Feasibility Study of Pawn Broking - Operation in Singapore

Pawn broking in Singapore started in the 19th century. In the past, pawn brokers were regarded as the "poor man's bankers". Now their customers include white-collar workers and businessmen. Each year, the pawnshops gave out loans in excess of $1 billion, and as at 2014, there were 214 pawnshops on the island (NLB, 2015).

Pawnshops has always been the place to go to when individual needs immediate cash by surrendering or pawning their valuable items, where they will get loan up to a certain percentage of the item's value. For the past few years, pawnshops in Singapore have undergone significant facelift and in a bid to attract the younger generation. According to a report by CNBC, tighter credit, rising living costs and a make-over of shops away from intimidating store fronts with metal bars have all contributed to their popularity among consumers in the Southeast Asian nation.

Pacific Pawn Brokers, an established pawnbroker based in Hong Kong is keen to set up operations in Singapore and its corporate mission is to be among the top three pawn brokers in whichever country it invests in. Mr Owen Shaw, CEO of Pacific Pawn Brokers, has engaged your consultancy service to help him analyse the pawn broking business in Singapore, and whether there is a significant growth in the pawnshop business in Singapore since the last financial crisis in 2008-2009.

You are provided with a sample of monthly pawnshop data from 1980 to 2015, showing the number of pledges received, number of pledges redeemed, amount of loans given out and amount of loans redeemed with interest.

Question 1

Compare monthly number of pledges received between pre-Year 2000 and post-Year 2000. Use descriptive statistics to describe and interpret the data on number of pledges received. You are required to identify the measures of location and dispersion as well as organise the appropriate output from your software into a relevant statistical and graphical presentation of the data. Justify your choices. What are your preliminary observation/s?

Hint: Summaries and presentations should help you decide subsequent analysis.

Question 2

(a) Identify the probability of the sample mean of number of pledges (monthly) received post-Year 2000 is more than 260,000 per month. Assume that the standard deviation for number of pledges received can be approximated by the sample standard deviation.

(b) Construct and state the 90% confidence intervals for the amount of loans (monthly) given out for the period pre-Year 2000 and post-Year 2000. Interpret these confidence intervals in your report. With these findings, can you validate if the amount of loans given out during those two periods is different?

(c) List the key assumption(s) you have made in constructing this confidence interval. Discuss if this/these assumption(s) is (are) reasonable.

(d) Explain what will be your follow-up actions including statistical tests, if the key assumption(s) were found to be violated.

Question 3

Mr Owen Shaw claims that the hearsay from business associate is that since 2008-2009 crisis, the pawn broking business has not improved much in terms of loans redemption with interest (high volume of loans redemption with interests represents more profit for the pawn brokers).

Select an appropriate test of hypothesis to determine if the mean amount of loans redeemed, including interest, has increased significantly between pre-financial crisis (2000 - 2009) and post-financial crisis (2010 onwards).

You should include the following:

(a) State the null and alternative hypotheses and explain how you developed these two hypotheses.

(b) Use the output from your software for an appropriate hypothesis test with α = 0.05. List the test statistic you will use for this test. Explain your decision criteria.

(c) Discuss the assumptions you have made in performing the hypothesis test. Are these assumptions reasonable for this case? Please provide explanation/s to substantiate your view.

Question 4

Interpret the above statistical testing outcome and highlight three (3) possible business or statistical concerns regarding the approach used here in determining whether the mean amount of loans redeemed including interest has significantly improved post-financial crisis.

If your group has a free hand on the project, starting from measurements, sampling, to analysis, what recommendations would you give for the problem in question?

Keep your answer within 400 to 500 words (indicate your word count)

Question 5

In about 300 words (indicate your word count), provide an executive summary of your analysis and findings to Mr. Owen Shaw with respect to pawn broking operations in Singapore and business prospects.