The Jewish people have often been associated with lending, dating back from ancient times to modern times.
While some of this is credited to their skill for underwriting processes, sound business planning, and mathematical skills, there are also key religious and societal roots dating back centuries.
Jews have historically been well-represented in the finance and business sector and continue to hold their place in modern-day lending in investment banking, property finance, and even micro-lending.
The Original Loans
The concept of money dates back to the Stone Ages, although not quite as we know it today. During this period, we first started to recognize organized trade of materials, initially obsidian, in exchange for goods and services.
In fact, during this time, temples were multi-purpose, not only as places of worship but also as banks. This is where they can first trace back the idea of lending agreements and charging interest. Although, unlike nowadays, the trade currency would be cattle and grain instead of what we now recognize as money. In the Babylonian era, the price of silver started to be defined, and loans of silver were introduced with a specific interest rate.
Lending has also been traced back to Ancient Greece with the first record of “collateral”. Pawnbrokers historically collected collateral from borrowers to mitigate the risk of the lender. This concept still exists today and is one of the foundations of secure business loans.
Middle Ages
In the Middle Ages, any monetary loans were governed by religion. Both the Christian Bible and the Islam Qur’an outlawed lending with interest, known as usury. However, lending was permitted by the Jewish Torah. According to Jewish scripture, Jews were allowed to lend money although they were only allowed to charge interest to gentiles (non-Jews).
Many suggest that this triggered further anti-semitism as Jews garnered a reputation for handling money – something which ultimately led to their persecution and, in some countries expulsion. In 1190 AD, the York Massacre saw around 150 Jews cornered into a tower by locals who did not want to repay their debts. The result was forced conversion to Christianity, although the victims chose to take their lives.
Jews acted as the middleman, first borrowing money from Counts or Noblemen, and then loaning money to non-Jewish peasants. With typical interest rates of 30-40%, these were loans which were very hard for the peasants to repay. However, if not repaid, the Jews would be killed by the nobleman from whom they originally borrowed the money.
Aaron of Lincoln
In the 12th Century, Aaron of Lincoln, an English Jewish financier, was thought to be the wealthiest man in England, with his wealth superseding that of England’s King. He established what is now recognized as one of the first banking associations.
Operating through agents, his specialty business was lending money to construct abbeys and monasteries across the country. Aaron was able to monetize land, corn, properties, and armor. Following his death, his assets were claimed by the English crown. This was the first incident in history for the separate division of an “exchequer”.
The Birth of International Lending
The 1800s saw a time in which loans became more widely available to the general population and saw the origins of international lending.
International lending can largely be credited to Mayer Amschel Rothschild, who’s named is associated today with a large investment firm.
Rothschild was a money lender residing in Frankfurt during the 18th Century. Father to five sons, he decided to send each one to a different European country and, in doing so, established the first international banking system. In less than a century, they became one of the world’s wealthiest families until losing their fortunes under Nazi occupation.
The Prominence of Jews in Modern Day Lending
Throughout the 18th and 19th Centuries, Jews were indispensable in international finance, particularly across Europe.
During the late 19th Century and early 20th Century, due to the mass immigration of Jews to the United States, some of America’s most prominent banks were established including Goldman Sachs and Lehman Brothers. They also were prominent in the Federal Reserve, U.S Treasury, and the World Bank. In modern banking, one of the household names is Goldman Sachs, one of the world’s most profitable investment banks.
Due to its association with the financial recession of 2008, Jews became an easy scapegoat for the financial excesses that led to the collapse of the stock market.
Modern Day Lending
A clear shift in modern-day lending is the concept of credit cards – a system that allows you to immediate money, which you pay back, with interest, at a later date. Mortgages have also become a commonplace loans. These types of loans have been present since the mid-20th Century but are constantly adapting and improving.
The birth of the internet meant a switch towards online lending. Since its inception in the late 1980s, this area has rocketed in popularity. Online lending has gained a less negative stigma, but it still remains taboo in many conversations between friends.
It was not only banks that switched to online lending but also the launch of ‘alternative lending.’ This allows borrowers to skip the bank and other traditional lenders. These loans typically require less strict eligibility criteria, are higher risk for the lender, and operate with higher interest rates.
Daniel Tannenbaum is a London-based financial consultant who has worked in lending for over ten years. He is also currently the co-founder of online finance connection service, Pheabs, commented:
“Jews have long been established with money lending and finance. The teachings of the Torah, overcoming persecution and community make Jewish people well-focused, business-minded and well-adapted to the skills and requirements of running businesses in finance and money.”
“While often a negative stigma for the Jewish people, short term lending and property lending in the U.K. has a strong Jewish presence, and the feeling is very positive. The community creates a vital source of employment but has harbored excellent relationships with the rest of the general population, allowing individuals to challenge and explore their expertise in science, technology, and data analytics. Overall, it is a prosperous business and a good job for a nice Jewish boy.”
Join the official YWN WhatsApp status
One Response
To tell the truth, it has always been really interesting for me to delve into the history of lending, especially when it comes to Judaism because all over the world the Jewish people are associated with money and finances. Frankly, before this moment I couldn’t even suspect some things and facts connected with this peoples. I can say that I completely share an opinion of Daniel Tannenbaum because it is an indisputable fact that Jews are really enterprising and business-minded people who can build a progressive, reasonable approach to money. Despite this, I was amazed by the fact that short term lending and property lending in the U.K. has a strong Jewish presence but it is so cool because British people were able to take this smart strategy and have such a which is really valuable.