Sea Loans in Genoa

One of the oldest forms of contracts are the sea loans that took place in Genoa in the 12th century. Their purpose was to provide entrepreneurs with capitalist funds. The sea loans were important because they allowed those with idle funds to exchange with people who were in need of funds. The crusades sparked a revival of commerce which increased the use of sea loans in Italy. At that time, sea loans were the only legal type of loan contract with interest. The amount of risk the lender in a sea loan took on was considered enough to justify charging interest. Anything in addition to the principal was seen as an insurance premium. 

The amount of interest charged depended on the length of the voyage and not the amount of money borrowed. The first type of sea loans were called original or bona fide sea loans. Original sea loans were a combination of a loan and a insurance contract. This meant that capital funds could be loaned at interest without breaking canon and civil laws. The second type of sea loan was the Pignus sea loan, which was primarily used by merchants who were not yet engaged in trading by sea. For the Pignus sea loan, a merchant who needed cash pledged goods and if the loan wasn't repaid by the time a ship got to port, the lender was able to sell the goods. The third type of sea loan are the usury evasion sea loans, which are not sea loans at all but really contracts with interest disguised as sea loans. This allowed them to be legal. One interesting fact is there was no obligation to repay a loan if the ship or the goods were lost at sea. 

The sea loans in the town of Genoa stimulated and assisted commerce because the risk of loss was shifted to a class of people who were wealthy enough to carry it. The wealth created by the sea loans was concentrated in a few notable families in Genoa. As we took our walking tour through the old part of town, it became evident that some residences were much larger and fancier than most. The nicest residences belonged to the wealthy families of the time who acquired much of their wealth through the sea loans. Even though Genoa’s wealth was concentrated among a few, the entire city benefitted from its strong position in maritime trading. This was also clear on the tour because Genoa’s old town contains many substantial and significant buildings which only could have been built if the city was prospering.

Below is a picture of the Church of San Lorenzo in Genoa's old town

--Anna and Kieran