The process of money lending originated from when money was first created. Historically, borrowers and lenders show that the practice has existed as early as 2500 – 2000 BC during the Sumerian civilization which is before ancient Greece.
Isn’t it amusing to think that society in early civilization also did their financial transactions similar to the way we are doing in our era? What did they use the transaction for? Perhaps to purchase grain from the market. No matter the reason for money lending, evidently the habits do get inherited. Nowadays, when we borrow money from money lenders like Money Lender Singapore for example, the money would be used so much differently than how they used them back in the days. Instead of purchasing livestock for us to eat, we use the money to pay for our mortgage and school tuition.
Money Lending in Years 1300 – 1600
During the late middle-age and Tudor periods, money lending was an important element of England’s local economy. Purchases of food, animals, or land required cash. It is also the case for the payment of rents and taxes, as well as the salary used to pay employees. Between the years 1300 and 1600, those who didn’t have enough money for basic necessities frequently borrowed from money lenders. Borrowing can thus be used for either consumption or investment in business, the exact same like we are doing today. Furthermore, they had limited supply of physical money for most of the late middle age era, as well as at times throughout the Tudor period. Even a wealthy guy may find himself in a situation where he does not have enough cash on hand to meet his overwhelming needs. That is why the late middle-age and Tudor offered both short-term and long term loans that ranged from a few weeks to six months. On local loans, interest was usually charged, however the amount was kept hidden due to the Church’s ban against money lending.
Money lending was especially significant in commercialized regions, such as big cities and their well-known huge economic districts. For instance, one of the most commercialized areas in the country existed within a twenty-mile radius of London. People residing on the outside of the metropolis area on the other hand were heavily involved in supplying consumer products to London by the fourteenth century. Middling and bigger tenants mostly focused their agriculture on market selling. A ring of at least thirty-two market towns surrounding late middle-age London, all within twenty miles of the metropolis, provided food, livestock, fuel, and handicrafts into the city while also serving as trading hubs for their respective areas. The scope of commerce in the market villages around London was exceptionally big, and the economic intelligence of the local inhabitants was extremely high. All transactions were recorded in cash, which was also the medium of exchange for the vast majority of them. Money lending played a very important role in this area, which is honestly not surprising.
The Birthplace of Modern Banking
Looking back, the story of lending and borrowing circles around the trade business between the grain merchants from Italy and the Jews. So it is safe to say that modern banking that we are practicing today was born in Italy.
It all first started when Jews who originally lived in Muslim Spain took their banking practices to the Italian trade centers. They as a community were forced to live in a slum area of the city in Italy called Jewish Ghettos. Here they began working with established Italian grain merchants and no-interest charging mercantile banks, which later became the first merchant banks in modern history.
Money lending practice was so common in Middle Age Italy that it was a normal view on a bench in Italian trading streets. Bench in Italian is also called “banco” hence where the word “bank” came from. Similarly, the word “bankrupt” is taken from the phrase “Banca rotta” which directly translated as broken bench. Banca rotta is a term that is used to describe a situation in which someone lost their traders’ deposits.
Nowadays, these no-interest charging “banks” seen in Italy have evolved into the modern-day banking system that we practice.