Informal credit in the Mediterranean area (XVI-XIX Centuries)

The informal credit market is nowadays an important part of the financial system of the developing countries. It plays a decisive role in channeling credit to small and poor borrowers in both urban and rural areas. It also constitutes an important source of working capital of all sizes and serves generally to ameliorate inefficiencies in the allocation of formal credit sector. The thesis is absolutely valid also during modern age. Along the whole modern age, informal credit has actually been the most widespread financial method. On the contrary, credit practiced by counters and merchants bankers, especially by means of letters of exchange, was mainly aimed at satisfying crowns, governments, municipal finances, big towns supplies needs. This is the reason why every commercial and manufacturing activity had to resort to un-institutional forms of credit, consisting in a wide range of traditional customs, law institutions and organizations, granting Europe the necessary financial basis from which to develop its own primary and secondary sectors.