One per cent for God

Accompany us now to the middle of the 15th century, to Perugia, Italy, where a crucial moment in the history of the moral marketplace is about to take place.

This is a time of great energy and learning and development in the human condition. The renaissance of art and culture, driven by the invention and dissemination of the printing press, is underway. Vestiges of the medieval persist. At this time ‘usury’ – the lending of money at interest – is forbidden. But the many contradictions of this time are about to yield a fascinating instance of financial and social innovation.

The Church is one of the main money lenders here and creates a loop hole for rich Christians, whereby they would seek ‘indulgences’ from the Church by giving money to the Church directly as part of their transaction. Per Messer Domeneddio, they called it: 1% for God. The poor have no such provision. Then, around 1460, orders of Franciscan monks began to preach a new idea, sparked from experiments conducted in England. They argued for the rich to give into a series of financial funds that could in turn help the poor. The Monte di pieta or ‘Mounts of Piety’ were born.

The Monte di pieta offered cheap loans for nominal pawns – a hat or a knife were typical – paid for by a network of levies on larger loans to richer Christians. A manageable interest rate was agreed with those who received the loans. Any profits from the resulting scheme went to the church and paid for the massaido – the clerks that would administer the system.

The Monte di pieta quickly spread and were soon adopted by other orders. Here was a very simple example of an almsgiving institution doing something more than simply giving alms.

From obscure beginnings in the distant past, this technique ripened into the modern microfinance movement.