From Bad to Beneficial: A Brief Look at Loans Then and Now
During the Medieval times, women had lesser rights and privileges than men, children had to start working at a very young age and all this was very normal and acceptable. Today’s society though presents a very stark contrast: just one case of discrimination against a woman could spark a revolution, and child labour is widely considered a crime.
Through the passing of time and the development and evolution of reasonable thinking, many concepts considered as norms in the olden days became outdated and even preposterous. Common beliefs and practices were brought down after logical arguments and occurrences proved them to be detrimental to society. The story of how loans and moneylending came to be also experienced the same turn, only they didn’t start out as the norm.
Just as butterflies begin as squirming caterpillars, moneylending began in a totally different state than how it is perceived today. During the Roman era, moneylending that came with any interest was considered usury- unethical and morally abusive.
Many religions, particularly Christianity and Islam considered it to be a sin, a form of thievery, and the argument for this was that moneylending with interest appeared to give lenders something out of nothing. Lenders would get more money without expending any effort, and lending took more from the borrower than what was originally given. And it didn’t help that most often lenders were wealthy men and borrowers were poor and had barely enough to pay off their debt, let alone pay interest.
Moneylending then, was viewed as an abusive act of power. It gave the wealthy power to exploit the poor, and for this, many religious and governmental institutions considered moneylending illegal and had moneylenders punished. Moneylenders were forbidden to receive Christian sacraments or a Christian burial. Their assets were taken from them, they were excommunicated, exiled and some were even put to death.
At around the 12th century, rules against interests began to ease up and moneylending started gaining acceptance due to the fact that it helped businesses greatly and boosted the economy. Firmer regulations regarding the maximum interest lenders could charge were also established, thereby keeping them from becoming exploitative.
Logical arguments regarding the benefits of loans and the justification of interests also became clear: loans gave borrowers fast financing without having to expend time or effort to gain it, and borrowers gained more from loans by investing them in business. Interests for loans also became justified because they were viewed as remuneration for the profit the lender might have made had he kept the money for himself instead of lending it out.
But even throughout the Renaissance period, views on interests were still very negative, and moneylending remained a very risky profession.
The Rise of Modern Moneylending
It wasn’t until the 17th century that perceptions regarding moneylending and interests began to change, thanks to the booming industrial revolution which was fuelled primarily by moneylending institutions, and a new generation of modern philosophers, including Claudius Salmasius, Robert Jacques Turgot and Jeremy Bentham. These scholars paved the way for modern moneylending as it exists today, by pointing out how the value of money changes, and so money lent today may be of lesser value when it is returned later on, thereby necessitating interest to even the value. They also pointed out how the proliferation of moneylenders could lower interest rates, making it a good thing.
As more time passed, the benefits of moneylending with interests became more apparent, as did the fact that it is mutually beneficial and mutually consented by both lender and borrower. Though there were those in the past that have used loans as a means of exploitation, these cases are becoming minimal as more and more guidelines are being established with regards to moneylending in order to protect both lender and borrower.
Loans and lending have certainly come a long way from where they started, and there’s no doubt they’ll continue to flourish. Their role in building up modern society and modern economy has become indispensable. Without loans, only the truly wealthy could own houses and cars, have enough capital to set up a business or grow their business. Here at Money3, we hope to contribute to this growth and development, by enabling small entrepreneurs to enter into bigger ventures through unsecured personal loans and cash loans.