Small is beautiful. On the efficiency of credit markets in late medieval Holland

Zuijderduijn, De Moor and van Zanden

In this paper we analyse the functioning of private capital markets in Holland in the late medieval period. We argue that in the absence of banks and state agencies involved with the supply of credit, entrepreneurs access to credit was determined by two interrelated factors. The first was the quality of property rights protection and the extent to which property could be used as collateral. The second was the level of interest in borrowing money at the time, as well as such borrowing compared with the interest rates on risk-free investments. For our case study, the small town of Edam, and its hinterland, De Zeevang, in the fifteenth and sixteenthcentury, we demonstrate that properties were used as collateral on a large scale, and that interest rates on both small and large loans were relatively low (about six per cent). As a result, many households (whether headed by men or women) owned financial assets and/or debts, and the degree of financial sophistication was relatively high.