A Wadset was a peculiar kind of financial instrument far in advance of its time, and one that could only have been invented by a nation that was poised on the edge of greatness. It was prevalent in Scotland in the 17th Century, prior to the founding of our first national bank on 17th July 1695, and was one of the larger factors that made Scotland a very attractive proposition for a Union in 1707.
The proliferation of this financial vehicle extracted large sums of capital from the newly found middle classes and deposited it in the hands of landed gentry who generally had systems or projects in place which could offer a return on investment. In a sense it was an early type of quantitive easing.
Wadsetters were a new middle class of tenant farmers. They had saved up their cash over the years until they had a substantial sum of money that could be loaned to the owner of their land, or some other ennobled, but cash poor, individual. The cash would be loaned to the owner of the land on the basis that the wadsetter would receive the rents from a defined number of farms . There was a sense that this was a development of the earlier Roman tax farming. A “proper wadset” was where a wadsetter had the authority to subsequently increase the rent paid on a property and keep the difference, until the agreed capital repayment was complete. An “improper wadset” was where a fixed repayment was made from the rents on the land and the landlord kept any excess. Naturally, the type of wadset partly determined the interest rate payable.
In England, this type of commercial instrument had not yet been developed. The landed gentry were sufficiently in funds to not require loans. The new middle classes were developing commercial activity abroad and were engaging in such things as the new coffee houses for their investment activity.
In the West Kilbride area there were a great many small tenant farmers and several large landowners. The ground is very fertile from the rich coastal plains at Ardneil to the lush fertile grounds of Drummilling. This meant that small tenant farmers could grow crops that yielded extra, beyond their rent, helping them to sell produce and gather capital.
One of the more famous wadsetters was John Simson who apparently found treasure in his land at Thirdpairt and suddenly became very wealthy around the 1650’s. The way to invest such money was to loan it it an impoverished landowner such as the Hunters or the Church, on the basis that you would receive the rents generated from the land over a period of time. In due course this enabled his son, Robert, to go to Glasgow University where he would ultimately be professor.
Wealthy wadsetters might then be elected to be elders of the Kirk and thereby attain the right to be buried in the Kirkyard. This is why we see to this day several gravestones marked tenant farmer, where normally such individuals would not be entitled to be buried so near to the Church building.
Once banks were founded in Scotland, they became the vehicle by which loans were then taken and savings deposited. Consequently the wadsetters became redundant in the sense that they could now secure their capital under the banking system.