Ancient Banking

The Evolution of Ancient Mesopotamian Banking

Banking, an ancient and enduring profession, has played a decisive role in shaping the destiny of civilizations throughout history. While it is often hailed as the bedrock of prosperous economies, untampered minds recognize the darker side of modern banking, characterized by the prevalence of usury. The origins of this archaic practice can be traced back to the latter part of the 4th millennium BCE, surfacing as a response to the growing need for a medium of exchange and a means to safeguard wealth.

In this article, I will specifically concentrate on the domain of Mesopotamian banking, shedding light on its significant developments and contributions throughout the centuries.

Mesopotamia — The Cradle of Banking Brilliance

Mesopotamia, with its sprightly society and quest for individual liberty, provided a fertile ground for the birth and development of banking. In this ancient land, banking found its roots many centuries ago, nurtured by a perfect blend of local and central economic activity, as well as the challenging nature of trade and exchange. Temples and royal palaces, acting as repositories for individual wealth, became the first models of banking institutions. This monumental invention by the Mesopotamian civilization would forever alter the course of human financial systems.

The Temple and its Financial Dominion

Within the archives of history, evidence points to a financial tradition taking hold within the sacred walls of temples. Temples, organized as redistributive systems, managed incoming rents, gifts, and outgoing rations and wages. Income, sourced from investments and royal grants, was supplemented by spoils of war, precious objects, and captured prisoners. Tax payments, religious dues, and various contributions, ranging from animals to grains and metals, predominantly silver, formed the temple’s wealth. Remarkably, an assayer proficient in evaluating these diverse payments played a dual role as both financier and assayer, foreshadowing the multi-faceted nature of banking.

Interestingly, an intriguing anecdote emerges when, many centuries later, Prophet Eesa (Jesus) — may God be pleased with him — expelled the moneylenders from the temple, he did much more than merely scratch the surface of a deeply ingrained Middle Eastern tradition that had persisted for millennia. The claimed event, known as the Cleansing of the Temple, is vividly portrayed in the New Testament of the Bible, specifically in the Gospels of Matthew, Mark, and Luke. The story goes: Within the sacred grounds of the temple in Jerusalem, Prophet Eesa encountered money changers and merchants conducting their business, prompting him to overturn their tables and denounce their actions.

His righteous anger and unshakeable commitment to the sanctity of the house of God were evident as he apparently proclaimed, “My house will be called a house of prayer, but you are making it a den of robbers.” Through this iconic act, Prophet Eesa expressed his staunch opposition to the commercialization and exploitation of religious practices, challenging a longstanding, rotten tradition deeply rooted in the region’s history.

The Birth of Standard Exchange

Intriguingly, the temple’s financial operations spawned the concept of a standardized medium of exchange, if not a single monetary currency. Exchangeable goods, such as gold and silver, and commodities like oil, yeast, beer, wool, leather, papyrus, and weapons, were deemed transferable without the need for formalities. In a pioneering move, exchange rates for these goods were posted for both present and future transactions, providing a framework for economic interactions. This early establishment of exchange standards laid the groundwork for a monetary system that would shape the destiny of commerce in the centuries to come.

The Birth of Financial Instruments and the Rise of Contracts

During the era of ancient Mesopotamia, particularly in the prospering urban civilization of Uruk, the earliest traces of financial activity come to light. This dynamic metropolis, sprawling with grand temples, houses, and gardens, was a powerful city-state whose influence extended throughout the Tigris and Euphrates valleys. Scholars argue that Uruk was not only the birthplace of urbanism and monumental architecture but also the epicenter of written numerals, language, and the world’s first literature. It was within the spirited streets of this metropolis that the seeds of finance and banking were sown.

During excavations of Uruk, archaeologists uncovered a fascinating find — peculiar clay tokens crafted in the shapes of everyday commodities such as jars, loaves of bread, and animals. Further research revealed a remarkable connection between these clay tokens and the pictographic inscriptions discovered on clay tablets at the Uruk site. These Uruk pictographic tablets are now recognized as the earliest steps toward written language in human history. Archaeologists demonstrated that symbols on the tablets, such as cloth or sweet, could be traced back to corresponding tokens shaped like a round jar or honey jar. The symbol for food evolved from a token resembling a full dish. These tokens represented a wide array of commodities from daily life, including livestock, crops, textiles, and various goods essential to the functioning of society.

Significantly, these tokens formed the foundation of the financial instruments held within the holy storehouse of Inanna, the (idolatrized) goddess of love, fertility, and war, during the time of Gilgamesh in Uruk. The temple priests, possibly in collaboration with the royal families or even Gilgamesh himself, employed these tokens as an early accounting system. The tokens were housed in hollow clay envelopes called bullae, roughly the size of modern-day softballs. To access the figures and verify the contents, the envelopes had to be broken open. The Uruk accountants devised a clever solution by making marks on the outside of the bullae, indicating the numbers and types of tokens enclosed within.

Indeed, contracts, the very essence of contemporary financial instruments, have a history that traces back to these very times. Even before the invention of writing and the introduction of bullae, contracts existed in various forms. However, the hollow clay balls and their accompanying tokens represent the earliest archaeological evidence of contractual agreements. Each bulla discovered within the Inanna temple complex signified a promise to deliver specific commodities. While the external markings on the bullae provided a written reference to the owed amounts and terms of the contract, the tokens contained within acted as tangible symbols of the obligation, kept by the lender as evidence.

This intriguing system sheds light on other peculiar aspects of the bullae. Some envelopes are entirely covered in impressions from cylinder seals, the Mesopotamian equivalent of a signature. These seals undoubtedly represented the personal mark of the party entering into the obligation. Bullae entirely covered in seal impressions suggests a concern on the part of the debtor, who sought to prevent the bullae holder from tampering with the contents by breaking open a small portion and adding extra tokens.

Clearly, the bullae system was designed to bridge the gap between the initiation of an obligation and its eventual fulfillment, encompassing a span of time during which payments would occur. In addition to representing an early form of accounting, these remarkable artifacts also highlight the importance of contracts in facilitating economic transactions. Thus, human’s desire to establish agreements and obligations helped form the foundation upon which the complex financial systems of today have been built.

The Evolution of Lending Practices and the Concept of Interest

Throughout human history, lending has been a common practice, even in the absence of immediate benefits. Both in rural and urban communities, individuals have extended loans of various kinds, offering their tools, time, and resources to aid one another. In small, closely-knit societies, such lending often occurred without the need for explicit contracts, as trust and the expectation of future reciprocity formed the basis of these transactions. However, as urban societies grew in complexity, limitations in familiarity among inhabitants and difficulties in quantifying the units of cooperation necessitated more formal mechanisms to ensure returns on helpful efforts. It was in this evolving landscape that loans, accompanied by interest, emerged as a means for lenders to accumulate wealth and obtain repayment, even when they themselves were not in immediate need.

While the interest rates charged by ancient Mesopotamian temples mirrored those of private individuals, there were occasional exceptions. During certain periods, private lenders imposed a rate of thirty-three and one-third (33.33%) percent on loans of barley, whereas the temple charged a more moderate rate of twenty (20%) percent. Historical evidence also indicates that the temple sometimes offered loans at low or even zero interest, aiming to bring down market rates that had become burdensome for debtors. In unique arrangements, interest could be paid through alternative means, such as offerings of food. Astonishingly, there are accounts of debtors who resorted to extreme measures, such as pawning their wives or even selling themselves to the temple when they were unable to repay their loans.

The Sumerian term for interest, mash, was also used to refer to calves. This linguistic connection is significant, as the ancient Sumerian society, particularly the people of Uruk, provided an ideal setting for the development of lending practices with interest. Uruk was a pastoral society where wealth was predominantly measured in livestock, and the accumulation of wealth was intrinsically tied to the growth of herds. The sophisticated Uruk accounting system enabled the Mesopotamians to conceptualize the ownership and exchange of specific quantities of goods. For instance, if someone lent a herd of 30 cattle for a year, it was expected that the repayment would exceed the original 30 cattle. As the herd multiplied, the natural rate of increase in wealth paralleled the rate of reproduction of the livestock. In a pastoral economy, the idea of interest became a natural extension of this understanding, linking the growth of assets with the notion of lending.

The numerical system developed in Uruk facilitated the precise quantification of goods and allowed for their symbolic representation. With this newfound ability to express and exchange units of wealth, the concept of interest took hold, as the lending of goods or resources became intrinsically linked to the expectation of receiving more in return.

Unification and Standardization

The dawn of organized trade and banking in ancient Mesopotamia witnessed a transformation that shaped the economic landscape of the region. Prior to the reign of Sargon I of Akkad, trade remained confined within the boundaries of individual city-states, with external participation prohibited. However, the unification of the city-states by Sargon of Akkad in (circa) 2334 BCE marked a significant turning point, leading to the establishment of a single empire ruled from his home city. It was during the reign of Naram-Sin of Akkad, Sargon’s grandson, that common standards for measurements were introduced, revolutionizing artisan guilds and facilitating economic growth.

A Deeper Insight Into the Role of Temples and Palaces

During the height of the Babylonian civilization in 2000 BCE, temples and palaces played essential roles in the economic landscape. Those depositing gold were required to pay a percentage, as high as one-sixtieth of the total deposited, as a fee. Both the palaces and temples assumed the responsibility of lending and issuing funds from their massive reserves of wealth, albeit to varying extents. Seed grain loans, with repayment expected from the subsequent harvest, were a common practice. These socio-economic arrangements were thoroughly documented on clay tablets, with clear provisions for interest accrual.

The habit of depositing and storing wealth within temples persisted until at least 209 BCE, as evidenced by the sacking of the temple of Aine in Ecbatana (Media) by Antioch, resulting in the looting of gold and silver. This long-standing tradition highlights the crucial role of temples as custodians of wealth, safeguarding the accumulated riches of the civilization. Temples became a trusted repository for valuable assets, ensuring their preservation and security.

Hammurabi and Economic Literacy

During the reign of the legendary Babylonian king Hammurabi (1792–1750 BCE), a remarkable literary tradition materialized, transforming the early utilitarian cuneiform script into a treasure trove of knowledge. This flourishing literary landscape predominantly comprised economic texts, yielding invaluable insights into various aspects of Mesopotamian civilization. Banking, represented by montages, land deeds, loan contracts, promissory notes, and partnership agreements, occupied a prominent place within this extensive corpus of economic writings.

The well-educated Babylonians of this era demonstrated an impressive mastery of advanced concepts in mathematics, paving the way for sophisticated financial practices. Their understanding of algebra enabled them to solve complex problems related to agricultural planning, such as determining the optimal amount of grain required for sowing fields. Moreover, their knowledge of logarithms empowered them to calculate compound interest. Hammurabi’s legal code, a foundation of ancient jurisprudence, codified essential principles governing economic activities. Specific laws dictated the repayment of loans, deposit procedures, and the liability of bankers in case of theft.

Furthermore, during this particular period, temples and royal treasuries reassumed their crucial roles as financial institutions. Apart from lending from their own reserves, these establishments began accepting deposits from individuals. Loans, initially offered in the form of seed grain with repayment tied to harvest, were accompanied by detailed receipts and fixed interest rates. Additionally, these institutions undertook the responsibility of making payments on behalf of their clients, utilizing the entrusted deposits to facilitate transactions.

Rise of Professional Banking in Babylonia

A noteworthy chapter in the history of finance opens its gates to reveal the genesis of private banking, where the earliest banking families stood as the vanguard of economic prowess and innovation. The House of Egibi stands out as a prominent example of financial activities that resembled modern banking practices. Flourishing sometime after 1000 BCE and continuing until the reign of Darius I, this Babylonian family’s records shed light on their role as lenders and entrepreneurs.

Scholars have engaged in debates over whether the House of Egibi should be classified as a banking family or an entrepreneurial entity. Despite the ongoing deliberation regarding their categorization, it is clear that the House of Egibi’s ventures showcased an extraordinary level of sophistication and economic prowess, comparable to that of professional banking. Through their lending practices and entrepreneurial activities, they exhibited a comprehensive and intricate approach to financial activities, exemplifying characteristics that comprised both banking and entrepreneurship.

The cuneiform records of the House of Egibi lay out a fascinating narrative of a family deeply engaged in financial activities during the Neo-Babylonian and Persian periods. These records depict the House of Egibi as a lending house, operating with a level of professionalism and sophistication that mirrored contemporary deposit banking practices. Their ventures were marked by entrepreneurial spirit and financial acumen, which positioned them as key players in the economic landscape of the time.

Other Banking Families in Mesopotamia

While the House of Egibi represents a notable example, it is essential to consider other families engaged in financial enterprises during ancient Mesopotamia. The House of Murashu, active during the 5th century BCE, played a significant role in providing credit to individuals and businesses. Similarly, the Borsippa-based family of Ea-iluta-bani thrived during the Neo-Babylonian period and beyond. These families, like the House of Egibi, were instrumental in shaping the economic landscape of their time.

According to the classification proposed by Nemet-Nejat, these prominent families, including the House of Egibi, can be referred to as merchant bankers. Their varied activities encompassed lending, entrepreneurship, and facilitation of economic transactions.

Evolution

During the 7th and 5th centuries BCE, banking practices experienced notable advancements, driven by key figures such as kings, priests, and private individuals. These individuals also played key roles in shaping the financial landscape, while private enterprise catalyzed change, cultivating innovative business methods and partnerships. For instance, the participation of kings ensured the allocation of necessary resources and provided a regulatory framework for the banking sector. Meanwhile, priests played a role in establishing trust and legitimacy within financial transactions, acting as intermediaries and guardians of financial affairs. Private individuals, including merchants and entrepreneurs, drove innovation through their entrepreneurial spirit and risk-taking endeavors, leading to the implementation of groundbreaking practices and the establishment of successful partnerships. Together, these diverse actors formed a cohesive network that propelled the growth and development of the banking sector, making it an integral component of the thriving economy of the time.

Hence, this transformative period marked a significant evolution in banking practices, as evidenced by the introduction of current accounts, the utilization of written documents as payment instruments, and the establishment of flexible arrangements that indicated a growing sophistication in financial transactions.

The surviving documents from this era are indeed valuable artifacts, shedding light on the substantial progress made in business methods and underscoring the development and refinement of banking practices. These remarkable innovations greatly enhanced the ease and efficiency of conducting business, thereby contributing to overall economic expansion.

Abstraction and Instrument of Payment

A notable trend between the 7th and 5th centuries BCE was the process of abstraction in banking. Written documents began to replace actual objects as a means of recording financial transactions. Acknowledgments of indebtedness also started to function as instruments of payment. This shift marked a significant advancement in the conceptualization and formalization of financial obligations, enhancing the fluidity and convenience of banking practices.

During this era, another intriguing phenomenon took place in the domain of banking known as partnership banking. Prominent businessmen, such as the Egibi and Maraschu families, spearheaded this trend by forming alliances and engaging in diverse financial transactions. These partnerships facilitated the consolidation of resources, expertise, and networks, ultimately resulting in improved efficiency and the expansion of banking operations. This early manifestation of collaborative enterprise within the banking sector heralded significant development in the industry.

Thus concludes the account of the historical events and significant advancements that shaped the banking industry in ancient Mesopotamia. In modern times, banking operations have evolved into an indispensable part of people’s lives, playing a vital role in enabling convenient and effective financial transactions on a global scale. Nevertheless, the historical presence of usury, characterized by its exploitative nature, continues to cast a shadow, reminding us of the ongoing struggle within a world influenced by sinister forces. These forces perpetuate a relentless cycle of debt, allowing the scourge of usury to afflict societies and grant unrestrained power to the oppressors who prey upon the burdened multitude.

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