It may seem to us that credit is a part of the new innovation made possible by the advancement of our modern society. However if we are going to trace back its history we can see that from the early times this has been a part of the civilization. In fact the term credit was already present as early as the Roman Empire although it was derived from the Latin word ?credo? which means ?I believe? or ?I trust?.
The existence and evolution of money and credit implements may have coexisted. There are historians that believe credit came first and has given rise to monetary system. This is so since trade in the early times focused more in barter system wherein goods and services are exchanged for other products as well as services. Mutual exchange can happen at that very moment or in some instances one gets the goods or services while the other will have to wait for the upcoming availability of the bartered item. The latter situation depends on the trust of barter partners to one another. Eventually barter was replaced by money. Although this is one view on how money originated, there were other historians who did not agree on this. Instead they believe that barter and money have existed together.
Money in the early times was in the form of coinage like gold, silver, copper, other metals as well as shells and other objects. Trading with the use of coin can be bulky at times and dangerous as well. Because of that coin was eventually substituted with paper money and bills. These advance the use of credit in trade since paper money and bills were good example of credit since they can be exchanged for gold and other coinage at that time.
Development of the banking system came next in the progress of credit in the society. Traders deposit gold and other coinage into the bank. And in their transaction they can make notes or bills that can be exchanged in the bank for coinage. Although this is mainly for business purposes there were also some private credit also known as consumer credit that existed.
Mercantile credit made its big progress during the industrial revolution. Consumer credit on the other hand became more pronounced in the market during 1800s. The use of credit before this time period was only enjoyed by the rich people more specifically the gentlemen who used this as their means of trading. Women during this time were not participating in such activity. The poor in turn were not given such privilege.
There were two companies that have caused the introduction of consumer credit to the masses, the US based Singer Sewing Machine Company and Ford, led by Henry Ford.
Singer started to provide a scheme for housewives to acquire sewing machine through an upfront payment and monthly dues. Ford during its mass production of Model T needed to dispose the high number of vehicles that they have produced so they venture on the concept of time-payment. This has given hundreds of individuals the chance to drive their own car.
Credit system over time has undergone innovation and modifications to suit the needs and demands of the modern society. Fresh schemes and procedures are now being introduced. However the premise of credit from the early times still holds till today, trust and risk for the creditor and acceptance or rejection for the debtor.
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Source: http://www.gettingmoneywise.com/2011/10/history-of-credit-in-finance.html
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