Banking before banks

Elise Dermineur Reuterswärd is an associate professor of economic history with a broad research interest that includes legal history, economics, gender, and women's history. Her doctoral dissertation "Women in Rural Society: Peasants, Patriarchy and the Local Economy in Northeast France, 1650–1789" examined the complex interplay between gender roles and economic structures in early modern societies. In her new book "Before Banks - The Making of Credit and Debt in Preindustrial France", she delves further into this area. Here, Elise focuses on the rural manors of Delle and Florimont in southern Alsace from about 1650 to 1790, where the abundant archival material allows for a detailed analysis of credit networks and instruments available to ordinary people.

How did you get the idea for this book?

It really started in 2008 when I witnessed the financial crisis firsthand. I was living in the U.S. at the time, and the scale of the crisis was staggering—foreclosure signs everywhere, entire neighborhoods affected. About nine million people lost their homes, which was roughly 10-15% of homeowners. Seeing that unfold made me question the foundations of our financial systems.

I started thinking about historical alternatives. What did people do before modern banking? How did they manage credit in ways that might have been more sustainable? Preindustrial credit systems, especially peer-to-peer lending, seemed to offer a stark contrast. They were based on trust, reciprocity, and long-term relationships rather than pure profit.

That curiosity led me into deeper research. I wanted to understand how past societies managed debt and credit before banks existed. What I found was quite interesting—many past financial systems prioritized other-regarding norms. That’s really what inspired me to write this book. I wanted to explore these older credit models and start a conversation about how we might rethink financial systems today to be more equitable and resilient.

What did people do before banks?

In premodern France—and in premodern Europe more broadly—there were no banks like we have today, but people still needed credit. They needed it to make ends meet, survive bad harvests, buy land, purchase livestock, or even just to pay taxes. There was also a general shortage of cash (coins), which made borrowing even more essential.

Lending and borrowing happened locally, often within tight-knit communities. Agreements were based on mutual trust rather than formal contracts. Unlike the rigid systems we have now, credit arrangements were incredibly flexible.

Loans were negotiated to fit the specific needs of both lenders and borrowers. Reputation mattered—a person’s standing in the community influenced their ability to get credit. Strong social norms helped ensure fairness and reciprocity.

One of the key insights from my book is just how adaptable these credit systems were. Rather than relying on standardized contracts, people negotiated repayment terms based on relationships and shared obligations. This created a financial system that was far more personal and resilient compared to the more impersonal and often extractive nature of modern banking institutions.

Are there any lesson from pre-banking societies for today’s economy?

Absolutely. One of the biggest lessons is that premodern credit systems were deeply embedded in social relationships. Lending wasn’t just a financial transaction; it was based on trust, reputation, and mutual obligations within the community. That created a kind of built-in accountability that modern finance often lacks.

Another key takeaway is flexibility. Unlike today’s rigid loan structures, pre-banking societies allowed for renegotiation. If someone had a bad harvest, their repayment terms could be adjusted. That kind of adaptability made credit more sustainable.
We also see that as finance became more institutionalized towards the end of the eighteenth century, it lost some of its social and cooperative function. Over time, lending moved from peer-to-peer systems to formal and standardized contracts. While that provided structure, it also introduced rigidity and, at times, a lack of fairness.
Interestingly, peer-to-peer lending hasn’t disappeared in today’s world. People tend to trust other people more than they trust big institutions. That’s a reminder that financial systems work best when they balance structure with human relationships.
So, the lesson isn’t about rejecting modern finance—it’s about making it more flexible, fair, and rooted in trust, much like it was in the past.

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Read more and order the book here