Showing posts with label Bill of exchange. Show all posts
Showing posts with label Bill of exchange. Show all posts

Saturday, 15 June 2013

A Belgian (?) 1934 Bill of Exchange

Bill-of-Exchange1 


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.

Wednesday, 27 March 2013

I Promise

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.


Friday, 18 January 2013

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.

Friday, 11 January 2013

What determined Interest Rates on Bills of Exchange?

1810 English Bill 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.

Thursday, 13 December 2012

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

A Hundi 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.

Tuesday, 20 November 2012

Merchants and Bills of Exchange

Kolkata Merchants 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.