The development of trading instruments II
Yvonne Harvey, Contributor

Two students of Mount Alvernia High School, in Montego Bay, St. James, present a group report at a community forum, convened by the Safe Schools Programme, Ministry of National Security, held at Cornwall College, Montego Bay, on March 22. - Contributed

Good day to you all. Last week, we looked at the barter system which was the early means of trading, and we also learnt that this system of trading, was replaced by indirect trading, using money as the medium of exchange.

Our modern economies include other trading instruments apart from money. Some of these trading instruments are referred to as 'near money'. Near money is highly liquid assets other than money, that is, assets that can easily be turned into money.

Included under this heading are: cheques, bills of exchange, credit cards, promissory notes, electronic transfers, telebanking and e-commerce (e-business.

We will now spend some time looking briefly at some of the above-named instruments.

Bills of Exchange

A bill of exchange is an order in writing requiring that another person pay on demand at a given date, a specified amount of money, to a named person or to a bearer. The bill is accepted when the acceptor writes 'accepted' across the face of it. It is also signed before the payment is made.

The bill of exchange fosters international trade and allows persons to receive goods and pay for them at a later date.

Credit Cards

Such cards allow the owner to purchase goods and services on credit. The credit card company pays the bill and then bills the card holder. A fee is charged by the credit card company for the service it provides to its customers. This facility has become very popular in our region.

Electronic Transfers

Other names for electronic transfer are: telegraphic money order, electronic money transfer, electronic funds transfer or electronic banking.

Electronic transfers allow a quick means of making payments or transferring money locally or abroad, since the transaction is done electronically.

Telebanking

This includes the transferring of money, for example to pay bills, using the telephone.

The system is set up at the bank, so the customer has the convenience of doing a number of transactions quickly in the comfort of his/her own home.

E-commerce/E-business

This basically refers to purchasing goods and services via the internet. Payment for such goods and services is usually by an accepted credit card. Like tele-banking, the method of doing the transaction is made convenient for the buyer.

Now, before we move on to the reasons for establishing a business, let us ensure that you understand what we mean when we use the term, 'business'.

A business refers to an individual or a group of individuals involved in some commercial activity, such as producing or selling goods and services with the aim of making a profit. Where persons are engaged in such activities but not with the aim of making a profit, they cannot be regarded as a business.

There are two main reasons for wanting to set up or start a business:

i) Desire for financial independence
ii) Self-actualisation/self- fulfilment

Let us now expand on these two reasons.

Desire for Financial Independence

Some people set up businesses in order to gain money so they will not have to rely on others for money, food, clothing and shelter. Financial independence in this case is realised through making a profit.

Where an entrepreneur sees he can sell his product for more than it costs him to produce, he will be motivated to set up a business so he does not have to depend on others.

Self-actualisation (self-fulfilment)

Often, businesses are set up because of the need to realise one's potential, because of the need to express creativity, because of the need to achieve and to be able to recognise one's limitations or shortcomings, and to be able to make improvements.

Business owners are able to achieve what is important to them. Entrepreneurs want to be their 'own bosses' and they set up businesses to bring their desires to life.

Businesses allow for self-expression, an opportunity to do what you enjoy.

Some persons see businesses as an opportunity to contribute to society and be recognised for their efforts. They gain trust and recognition from customers who have served them faithfully over the years.

Now see if you can think of other points. Put your points under the appropriate headings above.

Finally, here is your homework.

a) What is meant by, 'near money'? (2 marks)

b) Discuss four forms of near money. (8 marks)

c) 'Michael and Mary have just left school and have given thought to establishing a business'.

Define the term 'business' and give two examples of a business. (4 marks)

d) Explain three reasons they may have considered establishing a business. (6 marks)

Total marks:20

Next week, we will begin to look at business organisations. Bye.

Yvonne Harvey teaches at Glenmuir High School.