Credit and Banking

Curated by Ella

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Transactions involving banking and credit were risky before the developments made during the Italian Renaissance. The Church banned the use of usury in an effort to protect borrowers, but it mostly did the opposite (Roover, p. 271). The invention of credit and banking during the Italian Renaissance changed the way in which finances were managed and how transactions were executed. Bills of exchange, double-entry bookkeeping, partnership contracts, and commercial courts made banking safer and simpler (Padget, pp. 1–2).

Patronage

The newfound wealth generated through banking allowed for funding in many areas during the Renaissance. Prominent families often gained wealth through ownership of banchi grossi, or “great banks” (Roover, pp. 24–25). Many of those families were patrons of the arts, sciences, and literature. As a result of their support, the arts flourished. Patronage also impacted science and technological advancement (The Medici: Patrons of the Arts and Supporters of Sciences for Nearly Three Centuries).

The illustration depicts daily interactions that occurred in a bank during the Italian Renaissance.

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The Medici

The Medici family was one of the major patrons of the Renaissance. Their wealth was gained through the Medici Bank. Though the main bank was located in Florence, branches began opening across Europe as the institution grew. The Medici’s wealth was used to support not only the arts but the sciences as well. They especially aided in the development of scientific tools (Art in the Italian Renaissance Republics, c. 1400–1600). The family had a substantial role in the politics, banking, and culture of the Renaissance.

Later Impacts

Innovations concerning credit and banking developed during the Renaissance had a great influence on the development of modern practices. Some concepts that emerged during the Italian Renaissance are still in use. Bills of exchange and double-entry bookkeeping are two examples of this.

This image shows members of a financial institution from approximately the sixteenth century engaged in Bookkeeping.

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Double-Entry Bookkeeping

Double-entry bookkeeping is a method of recording credit and debt. It provided businesses with an accurate picture of their financial standing (Edwards, p. 447). Luca Pacioli wrote a book on double-entry bookkeeping and is credited with establishing certain principles in bookkeeping. His book Summa de Arithmetica was responsible for the widespread use of double-entry bookkeeping (Edwards, pp. 455–456). The practice significantly contributed to the development of accounting. Double-entry bookkeeping is still used today.

A bill of exchange sent from Bruges, dated September 23, 1438.

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Bills of Exchange

Bills of exchange are promissory letters of payment. It allowed merchants to transfer funds between distances without physical money. They were used as early as the twelfth century but developed further during the early Renaissance (Usher, p. 567). The bills are still used today, playing a crucial role in international trade (Usher, pp. 567, 570).

Other Websites

Gondi-Medici business records- This source contains photographs of documents relating to the Gondi and Medici families. These documents from the Renaissance give further insight into these influential families.
Merchants of Venice: How the Italian City-States Pioneered Modern Banking- This article describes the development of early banking in the renaissance and the concepts that were the foundation of it. The writer also goes into depth about the lasting impacts that banking during the Renaissance had.
In Italy, Art as a Window Into Modern Banking- This is an excerpt from a broadcast on banking around the fourteenth century. The main focus was on the Church's restrictions on money-lending and the effects it had on the Italian Renaissance.

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