Role of Goldsmiths, Merchants and Money Lenders in Banking

Professor Geoffrey Crowther in his ‘An outline of Money’, Reprinted page-22, said that “The present-day banker has three ancestors; the merchant, the money-lender and the goldsmith. A modern bank is something of these.”

The goldsmith, the merchant and the money lender played very important roles in the evolution of banking business. The reason behind this was:

·        They were honorable, honest and trusted in society.

·        They had different image and society knew they had money.

·     They were trustworthy in the society and people kept their money to them as safety as people  believed they could ensure the safety of the money.

·        People came to them to borrow money when they needed.

After certain period of time when transaction increased, both parties agreed to handover handwritten slip to keep record and for proof of transactions. This slip system was very fruitful and trustworthy for both parties.

When the Goldsmiths, Merchants and Money-Lenders found lending money as a profitable business they started to lend money from others who had useless or lazy money to increase their deposit which allowed them to lend money with more interest. And this business turned into banking business. Gradually this business then introduced us with the following slips:

·         Deposit Slip.

·         Bank Note.

·         Withdrawal Slip.

·         Cheque.

·         Bank-draft.

·         Letter of credit.

·         Circular note.

·         Traveler’s cheque.

·         Traveler’s letter of credit etc.