About the Creditum Debitum Blog

This blog draws on my interest in things connected to trade and the history of credit instruments and merchants.


An Introduction to Credit Instruments
What do I class as credit instruments? Credit instruments can take many forms. Sometimes they can include money or specie (better known as coins). More generally however, they are the means for facilitating an economic transaction, either of a financial nature, or  involving goods and services. This is what I will be focusing on in this site.

 
In the 21st century, probably the best known credit instrument is the cheque, which, in the UK, was forecast to be obsolete by 2018. The cheque's predecessor was the bill of exchange, which took various forms. More accurately, the cheque is a kind of bill of exchange whose potential demise was primarily the result of the digital revolution, and presumably banks' attempts to cut costs. However, a subtantial public hue and cry, has killed off any plans to do away with this modern bill of exchange.

Credit instruments are fascinating because the way in which they have evolved says much about societies, politics, norms, customs and laws, as well as, of course, the development of trade and economic networks. Reputation, honour and economic rationalisations were often married and manifested through extensive local and global merchant networks. Credit instruments over history have taken many shapes and forms, from a simple IOU to a complex promissory note, bill of exchange, remittance vehicle and institutionalised trust. Our understanding of credit instruments adds an important level of information about merchants themselves, and the economic, political and legal intrigues that they were often embroiled in. This blog seeks to open up a window into this colourful world.

Comments
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Contact
If you would like to send me an email, I can be reached on "creditum.debitum[at]gmail.com".

Use of Images
Unless otherwise indicated, all images on this website are the copyright of 'Creditum Debitum'.

Current Research

I am working on two books engaging my research interests (see home page for more on that). One project is a conversion of my PhD thesis into a book looking at the history of hundi during the British colonial period until the 21st century. An artery of credit for Indian merchant networks over centuries, the indigenous credit system hundi has received no systematic attention in histories of the Indian subcontinent. It was a system that was rather badly understood and defined, yet a highly negotiable instrument and source of liquid capital. It was also the backbone of Indian merchant networks. (You can read more about that over on my creditumdebitum blog pages - click on creditum debitum on the menu bar.) I looked at how British colonial legal transplants impacted on the hundi system. I also examined how colonial officials attempted, as part of their imperial project, to figure out what and how much they should borrow from English cultural contexts as opposed to Indian indigenous customs. In many ways, this book is an economic history as well as that of British empire building through the growth of the legal architecture.

Indian indentured labourers arriving in South Africa, Source: Wikimedia Commons

The other monograph is the fruit of extensive transnational research in India, South Africa and Britain thanks to fellowships held in South Africa and currently Germany. In this project I am looking at the changing status of Indian South Africans through the foreign relations of Britain, India and South Africa from colonial times through decolonisation.

Commonly referred to as 'The Indian Question' in the African context, discourses on Indian migration and settlement have primarily revolved around the issue of rights and entitlement as settlers in South Africa. I focus on the political, economic and legal conditions that gave rise to the so-called 'Indian Question'. I also look at how all of this influenced the construction of changing race and ethnic identification in South Africa during and after the British colonial period.

'Moorish Bazaar'

'Moorish Bazaar' by Rudolf Ernst 1854-1932 via Wikimedia Commons

It is not clear where this was painted. The Austrian painter Rudolf Ernst travelled to Spain, Morocco, Istanbul and Egypt to document life as he saw it.

Tea: Fancy a Cuppa?

Land girls enjoy a hot cup of tea after a hard day of rat-catching on a Sussex farm during 1942. Source: Ministry of Information via Wikimedia Commons

A few weeks ago, a southern African friend of mine was dropping me back home after a thirsty morning of shopping. It was a hot afternoon, and we were gasping for some refreshments. I invited my friend in for a ‘cuppa’ (British English for a cup of tea). "Iced tea?", she queried hopefully. To her disappointment, my considerable collection of tea solely consisted of the hot beverage kind. She exclaimed: "You're so British! Whoever heard of drinking hot tea on a day like this!"

Five Facts about the Slave Trade from the 1997 Film 'Amistad'

Poster from the film 'Amistad'. Source: Dreamworks via Wikipedia

1) The 53 Africans who revolted aboard the ship La Amistad in January 1839, were originally kidnapped from Mendeland near Sierra Leone. Once sold into the slave trade they were transported to Cuba, a hub for the transatlantic slave trade, on board the notorious illegal Portuguese slave ship called the 'Tecora'. In Cuba they were fraudulently classified as Cuban-born slaves, and were sold to two Spanish plantation owners who put them on board the Cuban schooner La Amistad for transportation to another Cuban port near a sugar plantation.

The Bazaar: Not a Quaint Market

Bazaar of Athens during the Ottoman Empire. Source Edward Dodwell, Views in Greece, 1821, via Wikimedia Commons.

The Eastern notion of the Bazaar was not just a marketplace, but also a nexus for craftsmen and merchants, where interest rates on credit, and currency trading values were set, much like a stock exchange.These rates and values could differ quite radically from one bazaar to another, which is why arbitrage often took place. However, distances between bazaars, and the hardship and danger involved with getting from one bazaar to another, could make arbitrage very complex.

 Bazaars were, in other words, wholesale hubs for commerce and they provided key arteries for the flow of capital across trading routes around the globe. This is important because it would indicate that West or East Asian capital had vast linkages that were not defined by European colonial capital alone. These bazaars were also not 'informal' although colonial authorities were often keen to describe them as such. In India for example, the most important mercantile communities would report their monthly bazaar rates to monetary authorities of British India. These bazaar rates would have a significant influence on official bank rates. If you are interested in a more detailed academic account of this see Rajat Kanta Ray's influential article: 'Asian Capital in the Age of European Domination: The Rise of the Bazaar, 1800-1914.'

Hundi for Payment of a Ransom

A hundi used by the English explorer William Moorcroft (1767-1825), to pay for a ransom. Source: World Digital Library  via Wikimedia Commons

Hundis were used for a variety of purposes, including payment of ransoms. It is not clear what ransom was being paid here. This hundi, to the value of Rs 11,000, was written in both Persian and English and signed by the English explorer and William Moorcroft on December 20, 1824, possibly in Central Asia or within the borders of what is now known as Afghanistan and Pakistan.

The Pepper Trade

14th Century Painting, Harvesting of Pepper in Coilum (Quilon/Kollam) in Southern India. Source: Wikimedia Commons

"Worth its weight in gold" was not just a figurative expression when it came to pepper in history. It might be your standard table fixture today, but back in medieval times, black pepper was the height of luxury. Native to the Malabar coast of south west India, in the state known as Kerala today, black pepper was the most important spice in the world during this period. A pound of pepper could literally rival the value of a pound of gold. Arab mariners travelled to the Malabar coast to procure the lucrative pepper and other spices (such as cardamom, cloves, cinnamon, and many more) for many centuries, long before the arrival of Europeans. The Mappilah (Mappila, Moplah) muslims who live in Kerala today are the intermarried descendants of these Levantine traders.

Modified website underway....

I am in the process of modifying the website, with apologies for the interruption to activity. Details to follow soon.

Reflections on Exchange - Interdisciplinary Conversations

Source: Merchants of eatables Bona Algeria By Snapshots Of The Past  (Wikimedia Commons)

How did people exchange items of value? In one form or the other, this question has cropped up in the scholarship of historians, anthropologists and philosophers - legal or social. Discussions on this topic contribute to grappling with comprehension of social and economic change in the pre-modern or modern world.

Was Hundi a Merchant Guild? The Question of Contract Enforcement

Merchant guilds are an important subject for economic historians because of their importance in understanding merchant organisation or networks in trade. One question that particularly occupies occupies economic historians is the question of contract enforcement. How did merchants cooperate and transact with each other, and minimise the risk of defaulting? Today we tend to think of contracts as a necessary prerequisite for transactions, backed up by a legal system. In times past, promises would have formed the basis for the earliest form of contract. A promise was regarded as less risky where parties were known to each other because peer pressure and collective reprisals in the community were more likely to reduce the risk of someone reneging on a promise. As long-distance trade with foreign entities developed, the risk of defaulting would have been greater. 

What on Earth is Hundi? The foibles of 'informality' and 'indigeneity'.

It is perhaps ironic that an ancient South Asian banking system which had earned a reputation for trust should today be widely regarded as an opprobious marker of the black market economy. Also known as hawala, havala, or havale, hundi's disrepute is relected in the in the many villainous descriptions awash in the in the international press: 'illegal financial transactions market', 'black money' and 'drug money', 'system of tax evasion', illegal transfers of foreign exchange', 'illegal money laundering network' and Hindi word meaning 'providing a code'. In a similar vein, the descriptions of hawala and hundi as informal  or alternative  have developed because they are perceived as both unofficial and lacking in legal accountability. The confusion does not cease there; there is not universal agreement over whether hundi and hawala are in fact the same, and just as press descriptions have been wildly different, this uncertainty has much to do with diverging opinions of what hundi and hawala respectively are.

Caravan Merchants and the Silk Road

Caravane sur la Route de la soie - Caravan on the Silk Road. Source: Atlas Catalan via Wikimedia Commons

The above illustration shows a caravan of merchants traversing the famed Silk Road. As evidenced here, caravan merchants usually consisted of large groups of travellers, often on camelback as well as horses.

The Political Economy of Merchants

 

Merchants operating in foreign countries could face a variety of challenges. The receptiveness of the host government was one such issue. If the host country's government was hostile to foreign mercantile activity, laws could be created to prevent entry to the country. In some cases, the immigration laws were worded in such a loose fashion that the government could arbitrarily choose to eject any undesirable immigrants. 

A Belgian (?) 1934 Bill of Exchange

 


Source: Minerva Archives, taken from Wikipedia

This bill of exchange dates back to 1934. It looks to be Belgian in provenance. The stamps suggest that, like many bills of exchange subject to government regulation, it incurred stamp duty.

I Promise

Did merchants use trust when they used negotiable instruments of credit?

Merchant networks frequently operated with reputation at the forefront of transactions. If a merchant had a weak reputation or was unestablished, any credit he obtained is likely to have been at a higher rate of interest, to reflect potential risk. Altruistic trust didn't feature in any prominent sense in these networks; there was inevitably a large measure of calculation involved based on repeated transactions of the past. In family firms, the reputation of the firm as a whole was paramount, such that any absconding or disreputable actions by agents or representatives of the firm were held as damaging to the firm's overall reputation, even if such parties were not family members.

Formality, Informality and the Grey Zone

This week I am redirecting you to a post entitled: 'Between Informality and Formality: Hundi/Hawala in India', which I wrote for the 'India at LSE' blog. The article discusses how a South Asian indigenous financial institution known as hundi  or hawala - a living institution - often occupies uneasy ground between the 'black' economy, the grey middle zone, and an older more formal past, due to the changing nature of laws and financial culture.

What determined Interest Rates on Bills of Exchange?

An English Bill of Exchange dated 1810.

Image courtesy of the British Museum Trustees.

 Interest rates on bills of exchange could fluctuate considerably. These rates depended on several factors: the prevailing market rate, the particular usage of the bill, the riskiness of the transaction, or the familiarity and strength of the connections involved in the exchange. Main commercial hubs which connected long-distance trading, often featured more favourable rates. Merchants frequently borrowed money through bills where interest rates were low, and sold where rates were high. In this way, complex systems of arbitrage evolved.

Did you Know that Hundi was Used by the East India Companies to Expand their Influence?

A Hundi in the Vernacular. Copyright: British Museum Trustees

The best known indigenous South Asian credit institution is 'hundi'. For hundreds of years, this system was used by merchants to remit money from one place to another, and to make payments like a bill of exchange. While I am loathe to put a square peg around hundi, some kind of approximation of hundi is necessary. My rough approximation of hundi is two-fold: a South Asian bill of exchange, and remittance system. So, hundi was both an instrument and a system. The mercantile networks which supported the use of hundis were often so well-established and pervasive that hundis were used in other parts of Asia, and even in distance locations like Africa where South Asian commerce had taken root. Over the course of the 16th, 17th, 18th and 19th centuries, even the Portuguese, Dutch, French and British East India companies used hundis to expand their own commercial and military presence in South Asia. Forming alliances with affluent South Asian merchants, and being able to tap into their networks was a significant factor in the British East India Company's ultimate hegemony over the other European companies.

Merchants and Bills of Exchange

Calcutta Merchants circa 1850.

The agents of credit instruments were inextricable from the instruments themselves. Merchants and bankers used credit instruments according to the rules, laws or customs governing their networks. Within a given network several kinds of credit instruments supporting different types of transactions inevitably evolved. Bills of exchange in particular, performed functions dictated by mercantile customs, norms and laws. Over time, specific bills of exchange acquired known classifications and functions which transcended individual networks. These instruments allowed merchants from one
community or region to conduct business with other merchants in far-flung locations.