People borrow and lend money from the very beginning of civilization, though known that first started in Mesopotamia, presently known as Iraq, before five thousand years. It is to be noted here that Mesopotamia is the birth land of human civilization where agriculture was introduced first in the world.
In fact modern Banking System was incepted in Hale in fourteenth century. The word ‘Bank’ came from the Italian word ‘Bench’. As the businessman managed and organised their business by sitting on bench, the word ‘Bank’ was originated from there. Hale was considered city of banks in fourteenth century. Rome was the biggest center of Christian religion at that time and consequently there was no scarcity of money in Italy. Moreover, Italy was in favourable geographical location located in the centre of Asia, Africa and rising European countries. As a result huge amount of money transactions took place in Florence and Venice of Italy. Naval force was the main source of strength of Venice. Many organisations were established there for insurance and funding or financing. Florence gave emphasis in production and to collaborate in business with North Europe. Based on that situation, the merchants and financers of that place initiated establishment of banking institution there. However, Zeovani the BC De Medishi first among them established bank in 1397 namely ‘Medishi Bank’.
In addition to Medishi Bank, some other banking families were in Venice. Peruzzi and Bardi were among the prominent banking families. Besides, many other financial organisations were established at that time. Even banks and lenders against mortgage were there. The lenders lent against property mortgage and the local bankers also lent to the foreigners in foreign currency. They also accepted deposits and lent to the businessman.
Medishi Bank financed long term loan for the product like wool. This bank was different in nature than other banks for three grounds. Firstly, this bank was the biggest in size. The daughter of the founder of this bank controlled the branches of 11 cities of Geneva, Bruges and London. Secondly, the network of the bank was decentralised. The responsibilities of managing branches were not in the hand of employees, rather the small partners were in Management. The partners enjoyed the profit partially. Florence family was the big partner in the banking world of this Medishi family. They were in monitoring network. As a result they availed the lion share of profit. This banking network brought the brand value of Medishi family. Thirdly, the branches got huge amount of deposits from the rich depositors for savings. Consequently the financial ability of the bank enhanced more than their capital as the deposits of the depositors added with the capital. So their ability to lend money was enhanced to a great extent.
Banking occupies a big arena in economics. Because banking business is somehow different than other business. It is simply to make money from money. No product is produced in this business. No trading takes place in this business. But fund is necessary to manage business because business is not possible without fund and that is why the business people have to knock the door of the bank for finance.
(Dr. Sarker is a professor, Dept. of Textile, Peoples University of Bangladesh).
