The story of money in Barbados contains many intriguing chapters which span three and a half centuries. For most of this period, the value of money depended on the Crown’s authority. It was not until 1951 that a regional currency with its own regulating board was introduced.
Early settlement and the Barter System
The first settlers in 1627 brought prevailing English monetary systems with them, but there was very little actual money in the island. For a long time, cotton, tobacco and sugar were legal tender.
It was forbidden to export coins from Britain, and the English would not permit the colonists to mint their own. As a result, a wide variety of Spanish and Portuguese colonial coins were circulated in the West Indies.
However, complaints about the shortage of circulating money in the islands continued. In an effort to keep the existing coins in the island, the colonial government deliberately over-valued the coins in circulation. The values of these coins were fixed at an official rate from time to time. They were not finally withdrawn from use until 1893.
The lack of locally produced currency in Barbados, as in the other British islands, forced the payment of salaries , debts and purchases of land , first in tobacco and later in sugar.
Many commercial transactions were conducted on a credit basis, with cash only being used occasionally to settle accounts. Nevertheless, there was often not enough coins, nor enough change, in circulation. Various attempts were made to deal with this problem.
Early Coinage and the Value of Money
Towards the end of the 17th Century the silver “Real” or “Piece of Eight” was the dominant coin in use. It would have been worth about four shillings and two pence in Britain, or six shillings in the West Indies. A mixture of British, Spanish, Dutch, French and Portuguese coins were also used.
Before 1705 gold coins were treated as multiples of the “Real”, and derived their value from the currency value of this silver coin. In Barbados, although the dollar remained the normal standard of value, its rating was tied to the value of the gold.
In 1706 a bank was established to remedy the deficiency of gold and silver coin by a paper money currency. However, the population deeply resented being “deprived “ of gold and silver and given “worthless” paper. It would be over a century before paper became legal currency.
To create more change, coins were also cut into fractions of ½, ¼ and 1/3 portions called “Britts” and the pieces put into circulation. Thus , one Spanish silver dollar or eight “Reales” could be made into two half dollars. Other coins were ‘clipped’, ‘marked’, holed’, or ‘plugged’ to indicate local approval, and to bring the coin to the accepted standardized weight.
For over 130 years (1704 – 1838) the value of Barbados’ coinage remained unstable. In spite of this, various efforts were made to standardize the coinage. In 1792 Governor Parry established by proclamation the value of circulated gold coins at a standardized rate proportionate to the legal coin of great Britain.
However , currency continued to fluctuate according to the availability of coins locally, and also to the value of precious metals on the world market. In 1799 the situation changed with the currency reforms of 1838.
The Establishment of a Banking System
By the early 19th Century the growth of the sugar industry and the onset of Emancipation in the colonies reinforced the need for a proper banking system. In 1834 the British Government introduced the colonial Banking Regulations. Two years later the Colonial Bank later Barclays’ Bank DCO received its charter. By 1837, thirteen branches had been established throughout the region.
However, currency problems persisted , for while the Bank could receive any colonial tender, it could only make payments in dollars.
In London, West Indian interests lobbied to have their currency rationalized. Subsequently, in 1848, ambitious West Indian merchants formed the West India Bank. This new institution challenged the monopoly of the Colonial Bank and circulated its own notes, although these notes were not legal tender.
In 1846 the West Indian sugar industry lost the protectionist policy of the British Government. The industry’s collapse precipitated the failure of the West India Bank and the worst crisis Barbados had known.
The unsatisfactory state of West Indian currency remained a major problem for the Government . The Bank of England acquired a monopoly of note issues only in England, but the Imperial Banks with charters for overseas banking were free to issue their own notes in the colonies.
In 1948 the currency of Great Britain became the official currency of Barbados. Commercial bank notes also circulated in Barbados, but imported coins were used well into the first half of the Century.
A West Indies currency board had been recommended since the 1920’s. During the 1930’s various colonies including Barbados set up currency boards of their own.
The Central Bank of Barbados
In March 1965 the Eastern Caribbean Currency Authority (ECCA) was established following the withdrawal of British Guiana and Trinidad and Tobago from the Currency Board to establish their respective central banks. Barbados was an original signatory to the agreement establishing the new Authority and became the headquarters of the Authority.
New opportunities to promote the local economy developed as a result of government’s decision to pursue an independent monetary policy.
With the addition of the offshore Banking Act of 1979, responsibility for the development of Barbados as an international financial centre fell to the Central Bank.
The Barbados Dollar
The Barbados Dollar was originally at a par with the Eastern Caribbean currency. However, in 1975, the Barbados dollar was revalued and fixed at an official rate of BDS $1.98 to US$1.00.
Denominations of two, five, ten, twenty, fifty and one hundred dollar notes are now in circulation. A one dollar note has since been replaced by a coin equal in value.