This is part of a series of articles sponsored by NIC bank. NIC will be having a rights issue starting 27th August. Read more about their rights issue here.

PART 1: PREAMBLE

“Only understand the origins of an institution or instrument and you will find its present-day role much easier to grasp.”

                        —Niall Ferguson, The Ascent of Money

Modern banking practices, like a lot of other ‘modern’ ideas in Africa, were introduced by colonialists. Like most of these ideas though, there were previous circumstances on the continent way before their arrival.

This goes without saying. Africa was the cradle of life. More importantly (can anything be more important than life?), it was the cradle of human life, of civilization.

I don’t mean Egypt, which is an easy example. As one of the first great civilizations, it contributed several socio-economic, political and philosophical ideas to the Greeks and Romans and so on to the rest of the Western world. I use a broader definition of the word civilization. It begins with the assembly of humans into small kin groups way before Egypt.

Members of these kin groups came together to share resources with each other. This led to the division of labour across gender and age, which, in turn, led to specialization. The increased labour efficiencies arising from this resulted in surplus. Groups thus traded with each other, exchanged tools, food, skins and mates, the latter resulting in bigger kin groups, tribes.

Early Trading

Barter trade worked for a while but there were inherent problems with it. It was difficult to compare the value of goods one to another. Common currency was needed (Then the Euro came along and common currency is being questioned).

Weight systems were developed in the ancient civilizations of Mesopotamia and Egypt—gold bars of a particular mass for the latter, the Shekel, a specific weight of barley, for the former. The British pound was developed in similar fashion, as a weight measure corresponding to a one-pound mass of silver.

But before the invention of these proto-monies of Egypt and Sumer, the most likely used piece of currency was livestock. The large sizes of tribes meant a scarcity of resources, which radically altered the way resources were acquired. Hunting and gathering was unsustainable. Other innovations besides trade were necessary. Domestication converted societies into nomadic pastoralists and farmers. Keeping cattle was one of few commonalities shared by these two types of societies.

The cattle-cultures of the Maasai and other nomadic groups in Kenya are evidence of this early value system, as are the ‘monetary’ terms of dowry still in use by most other ethnic groups.

Banking for the nomadic groups was tied to the currency itself. The cow was both the medium of exchange and the store of future value.

For the farmers, future value was tied to their longer lasting produce. The vagaries of weather necessitated the building of granaries and silos.

In the larger civilizations that followed, these storage houses were located around temples. Religion governed social life. Temple grounds were marketplaces (tell that to Jesus of Nazareth!)

These temples weren’t just warehouses. They lent seed to farmers and hired out implements, hired out their acolytes, too, as labour. Some of the earliest codified laws—scraps and bits that predate the code of Hammurabi—were financial laws; laws that governed temple interest rates and ground rents. (Temples were also, generally, the largest owners of land for all land belonged to the gods and were mankind’s only on lease.)

Demand Notes and Merchant Banks

Forward several millennia and religion is at it again. International networks run by the Knights Templar facilitated the financing of Crusades. Demand notes (proto bank notes) issued by members of the order (in return for hoards of gold) were redeemable at any of their far-flung castles.

Christian and Islamic laws against usury led to the rise of the Merchant bank families of Italy. Jewish folk had no compulsions against accruing interest on money lent and so thrived in this economy. Their Christian counterparts had to engage in a little creative accounting to take part in this boom. They circumvented usury laws by selling insurance against loan defaults together with the loans themselves as opposed to charging interest. (Creative accounting, it seems, is as old as, well accounting.) The prominent merchant bank families of this era—the Bardi, the Peruzzi and the Medici—were bankers to the Vatican itself.

The shift from temple banks to merchant family banks wasn’t exactly new to the 14^th and 15^th centuries. Records dating to early Babylonia include accounts of prominent merchant families such as the Houses of Egibi and Murashu, which engaged in early banking activities.

Some of the oldest family wealth still in circulation, the Rothschilds’, is directly attributable to international high finance.

Like the merchant bank families of the 14^th and 15^th Centuries, the Rothschilds were bankers to the Royal houses of Europe. They financed wars between cities and states. Their extensive networks enabled them to move money during the Napoleonic wars. They built their reputation as credible bankers and purveyors of information. (They knew of Napoleon’s defeat at Waterloo before the British government did.)

The Rothschilds were involved in everything finance from underwriting government bonds to originating foreign loans to funding infrastructural development to financing the expansion of the British Empire.

They bankrolled the Company of Merchant Adventurers to New Lands and Cecil Rhodes’ expeditions in South Africa. The former led to the creation of the British East Indian Company (BEIC), the latter to the formation of Rhodesia and the British South African Company (BSAC).

And here we are. 

Wait... You Said Something About NIC Bank?

Yes, I did, didn’t I?

Well, one of the founding institutions of NIC Bank was the Standard Bank Limited, which was, at one point the Standard Bank of British South Africa. But beyond that, this is the preamble to a series focused on NIC Bank’s past, present and future.

It is my hope that some of the historical far-reaching titbits above will offer an illuminating perspective to the more contained story of the bank and the prominent family behind it. Or maybe it will just make you sound smart in casual conversation.

Part 2: Next Week.