This guest post is written by Andy Horton of Gimmedosh.com. I have a background in IT as a business analyst and project manager primarily in financial organizations. I am interested in personal finance and the effects of general lending and specifically payday loans on individuals and families.
It is important to first find out more about the history of money before looking at the history of money lending, which obviously would have come after the creation and use of money.
Bartering has been a method of trading between groups of people or even nations before money became a common form of payment acceptable to both trading parties. This is still used in many less developed economies, especially in their tribal areas. It is also used by nations that have economic sanctions against them, e.g. Iran gives oil to China in exchange for them building a dam or a power station.
Most human new developments can be traced to a source, point in time or an era in one or two locations in a specific civilisation. However, the ‘creation’ and ‘appearance’ of money and its use can be traced to many periods and locations during the recent human history, 3 to 5000 years. It is worth noting that ‘money’ could take any form, e.g. whale teeth, metallic objects, ivory or live animals.
Early ‘Banking’ and Money Lending
The need for ‘banking’ and money lending is associated with more recent use of money, e.g. silver, gold or it was created as soon as money appeared in a civilisation. In Roman times ‘banking’ was carried out by private individuals who would also conduct nearly all money lending. They had regular borrowers who would be given what could be termed as ‘harvest day loans’, which would have been similar to today’s ‘payday loans’ for farmers at much lower interest rates (APRs). Many of these individuals who loaned money disappeared in the last days of the Empire, but were replaced by the very rich who capitalised on their dominant position and became extremely rich.
In 325 AD religious leaders decreed any form of ‘lending’ with interest above 1% per month as usury, although usury was regarded as any lending. This resulted in a misuse of the word and confusion about what was regarded as usury and what was acceptable money lending.
Most money lenders by the dark ages (11th and 12th centuries) and middle ages (15th and 16th centuries) were Jewish, as Christians were forbidden from lending money with any interest. The reason Jewish people had become ‘experts’ at this practice was primarily due to Christian religious leader’s decree on money lending and the fact that Jews were permitted to lend money with interest to non-Jews, but not to Jews. Most traders in the middle ages in Venice would have had access to ‘banking’ and money lending from the Jewish lenders who were kept in special locations of the city. This practice continued until it made many such practitioners very rich.
This is one of the oldest ‘money lending’ practices, which started in the ancient Greek and Roman times. It is a form of ‘secured’ lending with the individual placing one or more items as collateral for the borrowed money. There’s a ‘charge’, ‘fee’ or ‘interest’ payable for an agreed period (e.g. 30 days) before the item(s) can be retrieved from the pawnbroker.
These can also be regarded as a type of a secured ‘payday loan’ of the past, which continue today in most cities of western countries. The interest or fees charged by pawnbrokers tend to be much lower than unsecured payday ones, as the collateral significantly reduces the risk to the ‘lender’.
These are the mainstream banks, credit card companies and specialist mortgage lenders. The money markets are developed enough to allow these organisations to have a tight hold on the mainstream lending. Ironically, they also provide wholesale finance in the money markets for the much smaller payday lenders, which can be found at www.gimmedosh.com.