Now that financial agreements could be recorded, people wanted to be repaid.
At first it was considered inappropriate to receive anything more than the original sum lent. Before long, however, the value of money in relation to time was discovered. Ancient merchants quickly learned that the loss of capital led to lost profits.
The Sumerians were the first recorded culture to develop the concept of interest. The Sumerian word for interest was mash. It was also the word for calves.
The concept of returning more or “giving birth” to your asset came from lending cattle. If you lent someone a herd of 30 cattle for one year, you would expect to be repaid with more than the original 30 because the herd multiplies. The herder’s wealth has a natural rate of increase equal to the rate of reproduction of his livestock.
If cattle were the standard currency of the time, then loans in all comparable commodities would be expected to “give birth” as well. Why shouldn’t the same be true for money?
Early Interest Agreement
July 6, 172 B. C.. 24% interest
In the reign of Ptolemy, son of Ptolemy and Cleopatra, the gods Epiphaneis, the ninth year; Apollodoros, son of Zenon, being the priest of Alexander, the gods Soteres, the gods Adelphoi, the gods Euergetai, the gods Philopatores, the gods Epiphaneis, and the gods Philometores; the athlophoros of Berenike Euergetis being Kleainete, daughter of Apollonios; the priestess of Arsinoe Philopator being Eirene, daughter of Ptolemaios; Apellaios 5, Pauni 5, in Philadelphia of the Arsinoite nome.Theokles, son of Euboulides, Macedonian of the epigone, has lent to Aristokles, son of Herakleides,Corinthian of the epigone, 3 talents 780 drachmai of bronze money produced to view, for 13 months from the above date, with interest at 2 drachmai the mina per month. Aristokles shall repay to Theokles the aforestated loan, namely 3 talents 780 drachmai in bronze money, plus the interest accruing thereon, in the month of Apellaios, or in the Egyptian calendar, Pauni, in the tenth year. If he does not repay it, he shall pay as penalty the loan plus fifty per cent and simple interest, and Aristokles shall have the right of execution upon Aristokles or his surety, whichever of them he may choose, or upon both, as if by court decision. The surety of Aristokles for the payment in full of the above-mentioned loan of 3 talents 780 drachmai is Megisto, daughter of Nikostratos, a Persian woman, acting with her guardian, her husband, the aforementioned Aristokles. The agreements shall be valid wherever it may be produced. Theokles, about . . . years of age with a scar in the middle of the forehead, long-faced, with a scar on the lower lip to the right. Aristokles, about . . . years of age with a scar in the middle of the forehead, round-faced, somewhat dim-sighted. Megisto, about 23 years of age, of medium height, fair complexion, and eyes of rather light color.