History cannot answer with certainty, Who first issued credit?However, this phenomenon has a centuries-old history and existed long before the advent of modern money.
Prerequisites for a loan
Let us imagine a situation from the distant past, when the basis of the economy was natural exchange. A farmer, due to a crop failure, was left without the grain necessary to support his family and re-sow the field. To avoid starvation, he was forced to ask his neighbor to share five sacks of grain. However, the neighbor had already planned how to distribute the supplies, and he would not want to risk his wealth. Then the farmer offered to return not five sacks, but six, that is, more than he took. Such an incentive could have looked quite attractive, even considering the possible risks.
A similar situation could have happened to a herdsman who lost his livestock due to an epidemic, or to a craftsman whose products were destroyed by a natural disaster. The principle is simple: one has a need, the other has a surplus – and an agreement is built between them with benefits for both. What seems logical and familiar today could have been born over centuries of gradual development of relationships between people.
How loans appeared?
Archaeological records show that more than three thousand years ago in Babylon, Ancient India, Egypt and other contemporary states first loans in the world were already regulated by law. For example, failure to pay a debt could result in the debtor becoming a slave to his creditor, as could his children.
With the growth of civilization, the concept of credit evolved: goods as the subject of a loan were gradually replaced by money. In ancient Rome, the most successful businessmen became professional moneylenders, offering loans to different segments of the population: the poorest - to meet basic needs, the middle class - for large purchases (real estate, livestock), merchants - to develop trade, and politicians - even for bribes. Already then, types of credit appeared, which we know today as consumer, mortgage or business loans.
At that time, in neighboring Ancient Greece, the main creditors were temples, which can be considered the forerunner of modern reserve funds. At the same time, the laws were still strict: failure to pay a debt entailed confiscation of property or slavery. According to documents, the number of debtors in those eras was no less than in our time.
Where was the first loan in the world issued??
One of the earliest records of the use of loans can be considered records dating back to 2000 BC. At that time, loans were practiced in Mesopotamia until the next harvest. The main role in this system was played by Sumerian temples, which not only served as places of worship, but also served as the first prototypes of banks. This is where the first loan story.
With the development of cities and the complexity of society's needs, the concept of charging interest on loans arose.
In 400 BC, loans began to be practiced in Ancient Greece. Here, moneylenders would lend money on collateral, often the borrower himself, meaning that the person literally pledged himself to receive financial support.
Another significant step in the development of the credit system took place in India in 321 BC, where one of the oldest written documents in history was concluded - a bill of exchange. This document provided for the obligation of one person to pay a certain amount to another within a specified period. This approach was a real breakthrough in financial relations, opening the way to the creation of more complex financing mechanisms.
The first credit agreements in the world
With the spread of Christianity in Europe, the credit system underwent significant changes. Usury – making a profit from loans – was considered a grave sin, and usurers were often persecuted by the church. They could be excommunicated or even banished from the country.
But such restrictions did not stop the development of lending, but only contributed to the invention of new mechanisms. At the end of the Middle Ages, around the 14th century, a system of promissory notes appeared - the predecessors of modern securities. People began not only to borrow money, but also to conclude contracts on mutual obligations, bypassing church prohibitions.
Legalization of the loan
For centuries after that How did the loan come about? the service gradually became an integral part of economic relations and, eventually, reached the state level. In the 16th century, the first commercial banks appeared in Europe, the work of which was based directly on the idea of a loan. The main clients of such banking institutions were aristocrats and influential representatives of the authorities, who actively lobbied for their interests at the state level. Thanks to this, it was possible to officially introduce restrictions on interest rates for all banking organizations. For example, until the middle of the 17th century, the maximum rate did not exceed 6% per annum.
Despite this, a significant proportion of ordinary citizens still turned to moneylenders for loans. In addition, the practice of lending in the form of goods or services began to gain popularity during this period. For example, a butcher or baker could lend food on credit, or a shoemaker could repair shoes with the condition of future payment.
Impact of the Industrial Revolution
The Industrial Revolution and the development of mass production gave rise to a consumer society. This process became a powerful stimulus for the expansion of the banking system. The opening of branches of the largest European banks became a mass phenomenon: they began to appear all over the world with extraordinary speed.
The easing of lending conditions made consumer credit accessible even to ordinary citizens. As a result, moneylenders as a class virtually disappeared, losing their position in the financial market.
Credit history in Ukraine
History of loans in our country is closely connected with the first bank that started operating
On October 20, 1868, in Kyiv, it was named the “Kyiv Private Commercial Bank.” This institution existed for half a century and ceased operations only after the Bolsheviks came to power.
Origins of banking
Today, when was credit invented and legalized all relations between the bank and the consumer, Borrowing money is a common thing: if you need money for a business, renovation, or household needs, a bank will be happy to help. But 200 years ago, such an opportunity was almost unattainable.
The first prototypes of modern banks began to appear at the beginning of the 19th century. In Kyiv, during the Magdeburg law, the so-called "private-public commission" operated under the magistrate. It was engaged in the storage of funds and the issuance of small loans. However, only a narrow part of wealthy Kyiv residents used its services.
The first full-fledged bank in the Russian Empire appeared in 1817 under the name State Commercial Bank (later renamed simply State Bank). Its branches were subsequently opened in key cities: Odessa (1819), Kyiv (1839), and Kharkiv (1848).
The emergence of the first private banks
For many years, the state blocked the creation of private banking institutions, fearing competition for its institutions. However, the Industrial Revolution of the 1860s forced a review of this policy. The growth of production required a large amount of credit funds. In 1864, the first private bank appeared in St. Petersburg, and in 1868, two banking institutions opened their doors on the territory of Ukraine: the Kyiv Private Commercial Bank and the Kharkiv Commercial Bank.
Despite the same legal form (joint-stock companies), the banks differed significantly in structure. In Kyiv, the main founders were local businessmen and landowners. It is not known for certain who received first loan in Ukraine but the initiator of the opening of a large bank was financier Oleksiy Alchevsky, who owned a controlling stake.
Alchevsky's role in the development of banking
Oleksiy Alchevsky became a key figure in the financial history of Ukraine. In 1871, he created the first private mortgage bank in the empire, the Kharkiv Land Bank. This was a groundbreaking move, as traditional banks issued mostly short-term loans (usually for 6-9 months) secured by goods or securities.
The Alchevsk Land Bank was the first who invented loans secured by land plots with a repayment period of several decades. This decision aroused great interest, especially among the nobles, who after the abolition of serfdom often found themselves on the verge of bankruptcy. They actively mortgaged their lands, but even these funds often did not save them from final ruin. As a result, many estates passed into the ownership of the bank.
At the same time, Alchevsky reinvested his profits in the development of the coal mining and metallurgical industries of Donbas. Thus, at the end of the 19th century, the first financial and industrial group similar to modern holdings appeared in Ukraine.
The banking system before the revolution
In the second half of the 19th century, clear trends emerged in the banking sector of Ukraine. The central and northern parts of the country focused on financing the agricultural sector, especially sugar production. In the east and south, loans for the coal and metallurgical industries dominated.
The development of the banking system during this period laid the foundation for future economic relations, which in various forms persist to this day.
Corruption scandals in the leading banks of Ukraine
With the advent of the banking system in Ukrainian lands, there were quickly those who wanted to use it for personal enrichment. At the end of the 18th and beginning of the 19th centuries, Kyiv was rocked by a large-scale corruption scandal. It turned out that for several decades, city officials had been misappropriating part of the taxes collected in the city and embezzling funds entrusted to them by citizens through a "private-public commission." This scandal became the basis for the tsarist administration to abolish the Magdeburg law in Kyiv, finally depriving the city of the possibility of self-government.
In the mid-19th century, Kyiv again found itself at the center of a high-profile financial scam. During an audit of the funds of the Kyiv office of the State Bank, a colossal sum of 2 million rubles was discovered to have disappeared by the standards of the time. The head of the institution, Grigory Messing, blamed his subordinates, but further investigation exposed him as the organizer of the fraudulent scheme.
For several years, the bank, with the tacit consent of top management, issued loans to fictitious individuals secured by fake securities or, in general, to so-called "dead souls." The borrowed funds, of course, were not returned. Every time the bank went to court, it turned out that the borrower did not have any property to cover the debt. Thus, the debts were simply written off as losses. The cyclical nature of this scheme made it effective, although risky.
Eventually, the scam was exposed, and the institution's management was dismissed from their positions. However, most of those involved escaped punishment: the trials dragged on for years, and the main figures in the case did not live to see a final decision.
Modern lending system
The foundations of the modern credit system were formed around the middle of the 20th century, and have undergone only minor changes since then. In particular, there was a transition from the use of cash to bank cards and online payments. This move made financial transactions faster and more convenient.
Modern lenders make every effort to provide comfortable conditions for customers. Microfinance services allow you to get a loan on a card without unnecessary time, effort and nerves. Thanks to the simplicity of registration and speed of processing applications, the client can solve his financial issues in a convenient format.
