The History of Credit & Debt – Early Regulations of Interest & Credit
During the rein of Hammurabi (1792 to 1750 BC) the first regulations of interest, forgiveness of debt and extension of credit were developed.
Payments through a local banker or by written draft against deposit (early checks) were frequent and bonds to pay were treated as negotiable.
Interest was rarely charged on advances (unlike today’s cash advances) by the temple or wealthy landowners for pressing needs. However, if you did not pay the money back as agreed, interest was charged at very high rates for loans of this kind.
Merchants (and even temples, in some cases) made ordinary business loans, charging from 20 percent, for loans on silver, and 33.3 percent, for loans on grain.
Hammurabi’s code also stated:
- If any one owes a debt for a loan, and a storm prostrates the grain, or the harvest fail, or the grain does not grow for lack of water; in that year he need not give his creditor any grain, he washes his debt-tablet in water and pays no rent for this year.
- If any one fails to meet a claim for debt, and sell himself, his wife, his son, and daughter for money or gives them away to forced labor: they shall work for three years in the house of the man who bought them, or the proprietor, and in the fourth year they shall be set free.
- If any one fails to meet a claim for debt, and he sells the maid servant who has borne him children, for money, the money which the merchant has paid shall be repaid to him by the owner of the slave and she shall be freed.
- If a inn-keeper gives 60 liters of beer on credit she will receive 50 liters of barley at harvest-time.