Today, at the first need to borrow money, you can issue a payday loan. Within 24 business hours, the required amount will be debited to the card. But this opportunity has appeared relatively recently. How did people borrow money before?
Loans in ancient times
In the period of antiquity, the function of money was performed by products: meat, grain, flour. Receiving loans, debtors paid off in a completely different way than today.
Ancient Greece. The Hellenes had to work off their debt for several years. The exact term was determined by the one who gave the loan – as a rule, the wealthy landowner.
Ancient Egypt. In Egypt, part of the land was taken away from the peasants, thus depriving the crop. Sometimes landowners took the debtor’s relatives into the service and released them when the debt was worked off.
Ancient Russia. In Ancient Russia, debt relations were regulated by a set of laws “Russian Truth”. To pay off, the borrower fulfilled the obligation in the same way as in Ancient Greece. In some cases, it was even necessary to become a personal servant of a prince or a merchant. In ancient times, the rich, who lent food, land and livestock to the poor, themselves determined the amount of “interest” to be paid.
Today the situation has changed dramatically: the marginal cost of a loan is controlled by the Central Banks of every country. Modern loans do not lead to slavery and labor jobs, as they did centuries ago. But with a frivolous attitude towards this financial instrument, you can easily spoil your credit history and pay significant interest for late loan repayment.
Who are moneylenders?
With the emergence of money, moneylenders appeared, whose job was to issue loans to those in need at huge interest rates. Often, debtors had to repay an amount several times higher than the amount they borrowed. It is clear that it was difficult to repay the debt, so borrowers again and again turned to moneylenders. This situation was observed in European countries. Of course, things have changed over time, but the most important positive change has taken place in Asia – in the Republic of Bangladesh.
Who invented the first payday loan?
The people of the People’s Republic of Bangladesh, mostly peasants, have depended on moneylenders for centuries. Some of them gave the latter to pay off creditors. Bengali economist Muhammad Yunus decided to rectify the situation and began to issue small loans at very low interest rates. At the same time, he did not require any pledges and guarantors, but set a condition that borrowers should expand their business. This was a reasonable requirement, since most Bengalis lived off the family business – the trade in the grown crops. Many believed that Yunus’s innovation would not be successful, as people simply would not return the borrowed funds. But it turned out that the non-return rate was less than 3%! Most Bangladeshi residents have abandoned the services of moneylenders in favor of more profitable payday loans.
Muhammad Yunus opened his bank Grammen Bank in 1976, which still exists today, and in 2006 he received the Nobel Prize for inventing the microfinance system.
Payday loans today
Professor Yunus’s invention is used today in many countries of the world, because this financial instrument is really very convenient for users. In addition, when taking a loan out, you no longer need to make a promise to invest money in your business, as it was at the dawn of this service. It is enough just to contact the payday lender, indicate the required amount, receive funds on your bank card, and then return the loan within the time frame prescribed in the agreement with the lender or referral service.