Small is beautiful: the efficiency of credit markets in the late medieval Holland

Abstract

In this paper we analyse the functioning of private capital markets in Holland in the late medieval period. We argue that in the absence of banks and state agencies involved with the supply of credit, entrepreneurs access to credit was determined by two interrelated factors. The first was the quality of property rights protection and the extent to which property could be used as collateral. The second was the level of interest in borrowing money at the time, as well as such borrowing compared with the interest rates on risk-free investments. For our case study, the small town of Edam, and its hinterland, De Zeevang, in the fifteenth and sixteenthcentury, we demonstrate that properties were used as collateral on a large scale, and that interest rates on both small and large loans were relatively low (about six per cent). As a result, many households (whether headed by men or women) owned financial assets and/or debts, and the degree of financial sophistication was relatively high.

The Financial Power of the Powerless: Socio-Economic Status and Interest Rates Under Partial Rule of Law

“…A broad literature in economic history suggests that even where formal financial institutions are weak or altogether absent, borrowers of high socio-economic status have relatively high access to credit and/or pay less for loans (Rosenthal 1993;Hoffman, Postel-Vinay, and Rosenthal 2000;Botticini 2000;Reis 2010;Voth 2008a, 2008b;Zuijderduijn 2009;Ogilvie, Küpker, and Maegraith 2011;Padgett and McLean 2011;van Zanden, Zuijderduijn, and de Moor 2012).…”

“…Yet, Dutch property rights were stronger and better protected than those of other latemedieval polities (Zuijderduijn 2009(Zuijderduijn , 2014. Van Zanden, Zuijderduijn, and de Moor (2012) observe that creditors had numerous means of recourse when a loan went bad, and that a fairly advanced loan registry supported legal enforcement. Zuijderduijn (2014) adds that locals and 54 Where intermediaries were not used, credit remained relatively personal.…”

Preferences of the poor: market participation and asset management of poor households in sixteenth-century Holland

“…As such, the poor expressed their preferences, which demonstrates that a certain level of agency can be expected at all levels of society, if markets are sufficiently accessible. Elsewhere we have already demonstrated that the early modern Dutch markets were accessible, for various classes within society, and for both sexes (see De Moor et al 2009;van Zanden et al 2012). It remains hard to pinpoint the exact origins of this behaviour in the past, and whether this behaviour is to be expected in all societies with sufficiently accessible markets, but many authors, cited at the beginning of this article, have already convincingly argued that such micro-changes may have had a macro-impact on the economy and society of their times.…”

“…We have previously used a smaller sample of this source to make claims about the market volume (van Zanden et al 2012). To analyse the market participation by poor, middling, and elite groups, we have increased our number of observations and linked the names of participants to the tax register (schotkohier) of 1563.…”

The Financial Power of the Powerless: Socio‐Economic Status and Interest Rates Under Partial Rule of Law

“…van Zanden et al . () find that interest rates were essentially constant across groups in fifteenth and sixteenth‐century Holland. Rosenthal () shows that in pre‐Revolution rural France elites paid lower rates than the middle or lower classes.…”