Gold pawning soars to Rs. 356 bn, hidden crisis unfolds
Sri Lanka’s mounting cost of living has driven thousands of families to pawn their last line of savings –their gold.
Official data now reveal that gold-backed loans have surged to an estimated Rs. 356.5 billion in the first half of 2025, underscoring growing household distress and a silent debt crisis spreading across the financial system.
Pawn-advance arrears, a key indicator of unredeemed jewellery, jumped from Rs. 210 billion in 2019 to Rs. 571 billion by March 2024, according to Finance Ministry figures.
According to the Central Bank’s Financial Stability Review 2025, lending by licenced finance companies (LFCs) reached Rs. 1.84 trillion by mid-2025, of which nearly 19.4 per cent comprised gold-backed or pawning loans.
The data confirm that gold-collateralised credit continues to expand faster than other loan segments, reflecting liquidity stress among households, the Managing Director/ CEO of a leading finance company disclosed
This trend continues a sharp rise that began during the pandemic and intensified through the economic collapse of 2022–23.
A senior ministry official, speaking on condition of anonymity, acknowledged that the rise in gold pawning is “a sign that middle- and lower-income households are under acute pressure”.
He added, “Gold is not just an asset in Sri Lanka it is a symbol of security. When families pawn their jewelry to buy food or pay school fees, it signals deep structural distress.”
Economists caution that while pawning provides temporary liquidity, it can erode household savings and heighten credit risk for lenders.
Fitch Ratings, in an earlier review, warned that over-concentration in gold-backed loans exposes finance companies to collateral price fluctuations and simultaneous borrower defaults.
Beyond the balance sheets, the social cost is immense. Many families risk losing heirlooms and wedding jewellery, erasing generations of household savings.
“It’s not merely an economic issue; it’s emotional and cultural,” said a senior researcher at a leading economic think-tank. “When people start losing their gold, it means they’ve lost their buffer.”
Experts now urge immediate policy relief. These measures include temporary interest-rate caps for low-income pawn borrowers, grace periods for jewellery redemption, and soft restructuring schemes that allow the conversion of pawn advances into longer-term, low-interest loans. The ministry is also considering enhanced borrower-protection guidelines for non-bank lenders and community-based financial counseling to help families avoid repeat pawning cycles.
Macroeconomic stability, officials say, remains the ultimate relief. “Only when inflation is contained and real incomes recover will this dependence on pawning recede,” the ministry official noted.
Until then, Sri Lanka’s glittering gold reserves once symbols of wealth and stability have become the collateral of survival.
Hitad.lk has you covered with quality used or brand new cars for sale that are budget friendly yet reliable! Now is the time to sell your old ride for something more attractive to today's modern automotive market demands. Browse through our selection of affordable options now on Hitad.lk before deciding on what will work best for you!