It is fascinating how the concept of borrowing and lending has evolved over the centuries. The practice of loans is as old as the invention of money. Even during the barter system of trade, the lending happened.
It is amusing to envision how people in ancient civilizations took care of their financial or economic transactions? For ages, the system is in place and has evolved over the centuries. It gained structure with the advent of the banking system.
Over the years, several civilizations have shaped the way lending and borrowing happened. It is challenging to put everything on a timeline. The first large-scale loan system can be dated back to the Mesopotamian civilization. It has since then evolved to the state we are in today, with digital banking making available everything at the fingertip.
The Early Days – Mesopotamia, around 1750 BCE
As unbelievable as it may sound, in ancient Rome, the temples were the first-ever banks in the world. They used to act as a sanctuary where the wealthy used to keep their precious possessions. The temples safeguarded the deposited wealth of society. They also provided loans to individuals in need of ranch, stocks, or other routine work.
The First bill of Exchange – India, around 320 BCE
History states that one of the earliest instances of a bill of exchange occurred in India during the Mauryan dynasty. Merchants gave letters of credit to one another. India has a rich history in the area; the term ‘Rina’ came into existence while Rigveda got scripted. It meant ‘debt’!
The Pawnbrokers – Greece, around 400 BCE
One of the most widely adopted modes of lending was the one followed by the pawnbrokers. It followed the principle of collecting collaterals from the borrower to reduce the risk of the lender. The method is similar to the one that we use today as a secured business loan.
The Banishment of Baking – Middle Ages
The banking system has survived through a lot. One of the biggest challenges came from religion, outlawing the concept of lending. The term ‘bankrupt’ also came into existence during the time. It came from Italy and derived from the phrase broken bench.
The Modernization of Banking – England, around 17 Century
Both England and Italy have a significant role to play in the modernization of the banking system. At the beginning of the seventeenth centenary, the Bank of England became the first bank to issue permanent banknotes. By the 18th century, cheques were widely in circulation and reestablished the system of trade.
The Virtual and Plastic Money – 1900 to now
The banking system was revolutionized; by the introduction of credit and debit cards. The loans are available at your fingertips through credit cards. There also exist non-banking financial institutions. Financial solution organizations that enable easy and quick financing options for businesses, especially for the SME sector. Virtual money has eased the job of banking and has made it hassle-free. One of the most beneficial approaches towards banking came through online banking. With no paperwork and a lot more transparency, online banking gained popularity. Another alternative to banking evolved in recent years with peer-to- peer lending system.
What to expect next?
The banking system has evolved and will continue to reshape itself in the coming years. There is a huge trend seen with businesses moving away from the traditional model of financing. The financing organizations like NFS are coming up with many lucrative financing options and repayment methods. For businesses, customized finance seems to be the way forward.
The bottom Line
The Lending system has grown from strength to strength since the time it came into existence. From the temples to the fingertips, it has seen it all. With fin-tech evolving at a breakneck speed, it will be interesting to see how banking and financial organization aligns themselves.