Lending: From Then Until Now
Lending as a concept and a business has been around for many years, probably longer than you think! In fact, lending can be traced back a huge jump of 3,000 years ago. Many of the world’s greatest historical achievements would likely not have happened with the presence of lending in the past. For example, the expedition to the New World would never have occurred without extensive loans from Spain. Another example is that the Industrial Revolution of the 18th and 19th century was almost completely funded by loans. Thus, lending has long been a valuable part of every society and culture throughout the ages as a means to get things done.
Lending today is predominantly online and is a fast-paced, instant gratification type of industry. For obvious reasons, this is a new concept which found its root in 1985 with the first online lending companies becoming normal practice. In 2018, it is almost unthinkable for a lending company to not be based online or at least have the option to apply on online platforms. But what past practices which came before us in the lending industry paved the way for one of the most profitable industries worldwide?
The Ancient World
In ancient Greek and Roman society, secured lending was the style of lending of choice. It was the case that banking was always carried out by private individuals who could afford to offer loans. The loan style was very similar to a mixture of what we would call a payday loan and a collateral loan where the lender would ask for personal property to be secured against the loan until the borrower was next paid.
The lending industry was heavily based on the success of the crops as it tended to be farmers who would take out a sum of money in order to plant crops. The loans would be repaid once the time of the harvest came around, hence why the ancient lending system is likened to a payday loan. If the farmer could not repay, then their property would be taken by the lender.
During the middles ages, western Christianity dictated most of society’s norms and practices. Even though this is not practiced today, it was forbidden for Christians to lend money with interest. However, this did not apply to Jewish people (if they were lending to gentiles) and thus, Jews became the pioneers in banking and loaning in European society.
With the dawn of the 18th Century became the beginnings of the Rothschild dynasty and the concept of international banking. Mayer Amschel Rothschild basically birthed international banking when he placed five of his sons in different European cities, in turn creating a new network for the transferring of money. This new concept resulted in the Rothschild’s becoming one of the wealthiest families in the world within a century.
Building society’s also found their feet in the 18th Century, first beginning in Birmingham (UK) in pubs and cafes. Essentially, a building society is a financial organisation which pays interest on investments by its members and lends capital for the purchase or improvement of houses.
20th and 21st Century
Credit cards became a thing in the 20th century following the famous case of a business man named Frank McNamara in 1950. What he did was pay a restaurant bill with a small cardboard card, which is what is known as a Diners Club Card today. Eight years later, the credit card was launched by the Bank of America and became a valid form of payment. Check out the BBC’s brief history of the credit card.
Nowadays, you have so many choices when it comes to the type of loan and a large choice of lenders. You have payday loans, collateral loans, mortgages, guarantor loans, bridging loans, student loans, vehicle loans – the list goes on! The loans industry today is more concerned with the specifics of what you are using the money for, whereas way back in the past, you were simply granted the money without too many questions.
Going back to the 20th Century, we see a boom in a change in the industry in terms of the responsibility that is held by the lender and the borrower. There was a shift in overall practice. Instead of the use of physical collateral which had been previously used to lessen the blow of any risks when it came to lending money, the method which became mainstream was to financial data.