Burma, 1870–1930

Nakarattar commercial activities in Burma followed a very similar pattern to those in Ceylon. They were different in that Burma's economic environment provided even greater incentives for money-lending activities (in

contrast to investment in trade or fixed capital) than did the environment of Ceylon. They were also different in that, in place of Ceylon's plantation crops, Nakarattars directed their Burmese investments primarily toward what Furnivall (1956) has called the development of the Burmese "rice frontier."^[44]

Nakarattars arrived in Burma with the British conquest of Arakan and part of Tenasserim in 1826. The rest of Lower Burma fell in 1852. Upper Burma was not taken until 1886. But by then the Nakarattar-financed development of Lower Burma was already well underway. Nakarattars began to move into Burma in greater numbers following the conquest of Lower Burma. The first major agency houses are reported in Moulmein by 1852 and in Rangoon in 1854. But it was not until the opening of the Suez Canal in 1869 that Nakarattars were really attracted to Burma in a major way.

The canal dramatically reduced the transit time of trade with Europe and, in one fell swoop, opened up the European market for Burmese rice. Lower Burma had been troubled by decades of war and was extremely underdeveloped and underpopulated. In what has become the standard interpretation, Burma was a frontier waiting to be developed. Hoping to encourage that development (and the attendant increase in revenue), colonial authorities enacted the Lower Burma Land and Revenue Act of 1876, which established important changes in Burma's land tenure laws (Adas 1974a; Furnivall 1956; Siegelman 1962). The intended purpose of the act was to provide settlers with a clear title of ownership to land that they occupied and on which they paid taxes for a period of twelve years. An additional, unintended (but, from the colonial point of view, beneficial) consequence of the act was that it provided settlers with land to mortgage as security for loans to buy seed and fertilizer, and to meet other expenses.

As in Ceylon, a major reason for the Nakarattars' success in Burma is that they incurred relatively low costs in acquiring loanable funds from each other, from the British banks, or from the Imperial Bank of India; low costs, that is, relative to the cost of credit faced by Burmese or Chinese lenders who lacked access to these institutions.^[45] Consequently, Nakarattars could charge lower rates of interest than their competitors did and still make a healthy profit. No figures are available to me that allow for a precise reconstruction of the Burmese credit market between 1870 and 1930. But figures are available for the years immediately after this time. They provide a good indication of Burmese interest rates from various sources (Table 6), and, although there may have been fluctuations in rate averages over the sixty-year period, there is no reason to believe that the overall structure of the credit market would have altered.

This is not to say that Nakarattars thereby endeared themselves to their clients. On the contrary, they were the objects of considerable resentment (Adas 1974a). Moreover, as Siegelman (1962: 240) points out, although Nakarattar interest charges were relatively low, their rates (and the concomitant profits) exceeded the profits that could be obtained by rice cultivation. This was particularly the case when, as a condition of his loan, a cultivator was required to sell his crop or repay the loan by giving the moneylender title to his crop at a predetermined, submarket price. The issue raises the interesting question of whether the Land and Revenue Act of 1876 had any consequences other than providing security for Nakarattar agricultural investment and enticing agricultural labor from Upper Burma and Madras with misleading promises of land ownership. In other words, the Act of 1876 seems to have accomplished little more than to provide new clothing for precolonial forms of agricultural tenancy and landless labor.

In any case, the situation was ideal for Nakarattar operations. The rice-frontier economy of Lower Burma was even more expansive than Ceylon's, and a broader spectrum of agriculturalists could offer good security for loans. The consequences are not surprising. Figures on Nakarattar investment provided by the Burma Provincial Banking Enquiry Committee in 1930 (BPBEC I: 211; see below) indicate a preference for money lending over other forms of investment of roughly two to one. Tun Wai believes the ratio to have been far higher than this.

The bulk of Nakarattar investment went directly to loans for agriculturalists. Reports for 1929 indicate that in Lower Burma (where Nakarattars invested the bulk of their money) about Rs. 110–120 million was advanced in short-term loans to agriculturalists. Another Rs. 32–33 million was advanced in intermediate and long-term loans (BPBEC 1930 I: 2). In addition, Nakarattar investment in rice trading was also substantial. Nakarattars provided roughly two-thirds of all agricultural credit, and in many of Burma's provinces Nakarattars provided nearly 100 percent of loans to rice cultivators (BPBEC 1930 I: 67–68). These loans frequently took the form of forward contracts which entitled the moneylender to receive the crop in repayment. It is not clear whether taking possession of such crops should be regarded as a return of interest on Nakarattar money-lending activities rather than as a profit from their investments in rice trading. But in any case, according to A. Savaranatha Pillai (1930: 1177), Nakarattars used their advantageous position as both moneylenders and rice traders to control as much as 50 percent of Burma's rice crop. From this point, their choices broadened. They could sell the rice to British traders, or they could compete with the British, either sending it directly to Madras and Ceylon or, from at least 1916 on, by first milling it in Nakarattar-owned mills in Burma (Indian Industrial Commission 1919 V: 543, cited in Mahadevan 1976: 191). Besides these investments, a few elite Nakarattars were also involved in Burma timber and oil (Krishnan 1959: 31).

Available estimates of Nakarattar sources and investments of capital share all the problems already encountered in grappling with data collected by the Madras and Ceylon banking enquiry committees. In addition, new problems creep into the task of interpreting available Burmese data. Tun Wai (1962: 42), a Burmese banking authority, presents consolidated balance sheets for Nakarattar liabilities and assets in 1929 and 1934, respectively, prepared for him by the Rangoon Nattukottai Chettiar Association (see Figures 4 and 5). Examination of the assets and liabilities for 1929 immediately indicates the highly liquid quality of Nakarattar assets prior to the depression: Tun Wai estimates that 100 percent of Nakarattar assets were in cash, hundis , or loans. After the depression, slightly less than 17 percent of Nakarattar assets were liquid; the balance was tied up in land and houses.

However, Tun Wai's classification is problematic on at least two counts. For one thing, he employs categories entitled "Deposits in Madras" and

"Deposits in Burma" as liabilities. This is somewhat mysterious. Since the amounts under these categories appear as liabilities rather than assets, they cannot actually refer to deposits (i.e., assets) held in Madras and Burma. One wonders, therefore, whether they refer to advances from Nakarattars in Madras and Burma (probably in the form of two- or three-month term deposits, in the form of thavanai hundi —see Chapter 5). If so, the figures should recur under the heading "Assets" since one Nakarattar firm's deposit in another's Burmese agency was simultaneously an

asset of the first and a liability of the second. They do not, in fact, recur in this fashion. Nevertheless, disregarding one or the other side of ledger entries for interfirm deposits is entirely consistent with the kinds of practices in which Nakarattars were caught out in Ceylon. So the question is left open.

A second problem arises in the category of liabilities that Tun Wai lists as "Proprietor's and Relatives' Capital." He is careful to acknowledge the difference between these two categories in his text, identifying them correctly by their Nakarattar terms as mudal panam and sontha thavanai panam , respectively. He also notes that the proprietor's capital generally made up only 5–10 percent of a Nakarattar banker's capital, while the proprietor's relatives' share made up 60–70 percent. But he never explores the implications of this Nakarattar distinction. Indeed, it never arises again in his analysis and was dismissed in the construction of his chart.

I explore the varieties of Nakarattar deposits in more detail in Chapter 5. For the present, suffice it to say that the significance of the distinction between the proprietor's capital and Nakarattar deposits of various kinds, still to be explored, cannot be overemphasized. Keeping it firmly in mind, the lesson from Tun Wai's balance sheets and his additional comments in the text is, once again, that Nakarattars provided a considerable amount of their working capital from interfirm loans, including their sontha thavanai panam deposits from relatives. These were further complemented by loans from British exchange banks and the Imperial bank. They used very little of their own capital in carrying out their banking business. To place the issue in comparative perspective, the Nakarattars used what is known in Western financial circles as "leverage."

Driven by the world demand for rice and financed by Nakarattar banking operations, Burmese agriculture proved itself the most lucrative Nakarattar investment in British India. By 1929, the number of Nakarattar firms operating in Burma had reached 1,498 (BPBEC 1930 I: 195–196). By 1930, they had channeled from 60 to 80 percent of their total assets into Burmese business: by some estimates, Rs. 750 million (see above). Their role was perhaps even greater than in Ceylon. As they were the primary financiers of Burma's rice industry, their impact is directly visible in statistical measures of the growth of paddy acreage, of expanding rice and paddy exports, and of the wholesale price of paddy in Rangoon markets (see Figures 6–9). The consequences of the world depression were no less remarkable. As commodities dropped and Nakarattar clients were no longer able to meet their interest payments on loans, Nakarattars foreclosed on mortgages and wound up owning over three million acres, roughly 30 percent of all Burmese rice-producing land.

Figure 6.
Acreage under paddy cultivation in Lower Burma, selected years, 1852–1933.
Source: Furnivall (1956: 56–57).

Figure 7.
Wholesale price of paddy in Rangoon markets, 1865–1931.
Source: Cheng (1968: 73); reproduced in Mahadevan (1978a: 341).