The trading post on that remote beach of Igan began to teem with people who either trekked or paddled in boats from the interiors. They came to look and be seen, as well as to trade with Hong the Younger.
The young man was busier than ever, and with the help of his local wife, he managed to negotiate with new tribes that brought in things to sell. Ladong, who understood that the more business Hong made, the more he stood to earn, also willingly acted as Hong's referrer to the other chiefs. Business thrived.
Just 2 months before Captain Hong's ship was due to arrive, four men from Ladong's longhouse approached the Chinese merchant for a loan.
One of the men, Apong, said, "You sometimes ask for credit from us too. When we bring nests or fur to you, sometimes you cannot pay us and you ask us to be patient. Now we are asking that you extend us the same courtesy."
On seeing young Hong's hesitation, Ladong explained, "These men have found a new cave in the mountain. But the wall are high and steep, so they need more tools and materials to build scaffoldings. They cannot rely on rope alone for the work."
"I see. Then I can make an investment of the 100 beads. We can then share the profit together."
The warriors began to mumble among themselves as they discussed the proposal. Finally Apong turned back to face him and said, "No, we do not wish for you to invest in our expedition. We only wish to borrow the money."
"In that case, I will have to ask for a collateral, which is an item of equal value to the loan amount plus the interest of 10%. You must pay the full amount on your return, or I will have to charge extra interest."
"Our rice will be ready for harvesting soon. We will use that as collateral."
Young Hong turned to Ladong. "Can you be their guarantor? It may mean that you will have to pay the difference of what they owe me, if the collateral does not come up to that amount."
"I understand, I will do it. But I will not translate to them what you said. Nobody who goes on a dangerous expedition plans to fail, and any mention of failure is a taboo to my people."
Hong bowed low to the chief, for once more the elder's wisdom had helped the young merchant avoid a riot in his shop. He took out a well-used book from the shelf and placed it on the counter table. His assistant brought out a tablet that held two brushes and an ink block, and placed it next to the book, which was now opened to an empty page.
After much nodding, smiles and a few moments of waiting while Hong noted down the transaction in the book, a bag of 100 glass beads was handed over to the men.
With the borrowed money, the group of men bought newly made iron tools, thick ropes and sturdy planks from the best craftsmen in their village. They returned to the beach a month later with 400 kilogram of nests. As the price of the nests had doubled since the previous year, the men sold them to Hong for 800 beads.
| 400 kg of nests | 800 beads |
| Loan | [ - ] 100 beads |
| Interest on Loan | [ - ] 10 beads |
| Money Owing | 690 beads |
After paying pay back the loan and interest of 110 beads, the men split the remaining 690 beads 4 ways, which came up to 172.5 beads each. They were very pleased with the result, and promised Hong that they would again return to the cave to get more nests after the harvesting season.
Note:
When someone loans money there is always the risk that he cannot pay back the full amount. For that reason a prudent lender will always demand for collateral and a guarantor. The collateral must be something of monetary worth, and can be sold in the event that the borrower fails to pay the loan, so the lender can get his money back. The risk and trouble of lending out the money will be compensated in the form of interest.
Once the borrower pays back the full amount plus interest, he will get back full right on the property he put up as collateral.
Question:
Will the lender collect the full amount on the collateral once it is sold?
No, he will only get the amount of money owed to him. As in the above example, if Hong the Younger sold the crops for 150 beads, then he will returned 40 beads to the families of the men.
Why is a guarantor needed then?
The guarantor’s role is to vouch for the character of the borrower as well as to pay on his behalf if his collateral does not hold up to the borrowed value. For example, if the Hong had to sell the crops for 90 beads, then Ladong will be required to pay him another 20 beads to make up the full total of 110 beads (100 borrowed plus 10 as interest).
Isn’t it unfair that Hong still gets his money back whether the men were successful or not?
No, because if the men wanted Hong to share in the risk, they should have asked him to invest in their expedition. In that case, they would have to share the profit with Hong at the agreed rate. Say he gets an equal share of 20%;
Bird’s nest - 800 beads
A 20% share - 160 beads
Conclusion
When money was first introduced an object that is universally recognized as valuable is usually used. For example, iron coins can be melted down into knives, copper melted down into brassware while beads can be used as ornaments to show a person’s wealth. Nowadays, currency has begun to exist for its own sake; hence certificates of different values are issued by federal governments to encourage trade inside and outside the country.
This is one reason why an investor checks the world news frequently; to make sure that his investment is under the influence of a good and fair government who, like Captain Hong, has the ability to honor the value represented by their currency.
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