Exploring Pawn and its Legal Practices in Indonesia: A Study of Challenges and Solution

Pawnshops exist to provide loans based on lawful agreement in which the provided loans could bring a number of risks in loan return. Moreover, pawnshops are expected to be able to provide legal certainty to creditors on debt payment. Moreover, the implementation of this pawn system often faces problem in the valuable items secured as collateral in fiduciary agreement in which the debtor has a right over the collateral and the object used as collateral may rapidly move. This problem is deemed crucial for pawnshops as non-bank loan providers which give loans to societies, apart from unpaid debts. It demands thorough and analytical examination in order to be more accurate in determining the value of object secured as collateral, or pawnshops will keep facing such a serious problem in term of the status of collateral put for loans. Collateral-related problems are becoming more complicated, as these problems are not only included in civil law anymore, but they may also take criminal law. As a consequence, this collateral problem which is involved in civil code may no longer become a single case, as it is also taken as criminal conduct. This condition highly requires pawnshops to be more careful, thorough, and analytical in receiving collateral set as a security. Therefore, in line with the vast development of Indonesian economy, pawnshops whose rule is based on Dutch’s legal system require legal certainty concerning pawn problems rising in its practices