For a very long time, in France, the Christian and state solution to protecting the poor was to ban interest-bearing bank loans, thus excluding them from protection and placing them de facto in the hands of uncontrolled greedy usurers. A first solution was to introduce Catholic charitable pawnshops in France charging low interest rates, then the mission of social utility of Monts-de-Piété was recognized by the government in France by their transformation into municipal credit institutions in the early 20th century. Furthermore, with regards to deposits, the Caisses d'Epargne were created by philanthropic bankers in the 19th century to educate the population in the virtues of saving. In the last 20 years, using new opportunities provided by European Union directives, some fintechs such as notably Nickel were active in banking inclusion to combat poverty.
TopIntroduction
“Financial inclusion is a key enabler to reducing poverty and boosting prosperity” 1
World Bank
According to the World Bank definition “Financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs”2. Moreover, Financial inclusion has been identified as an enabler for 7 of the 17 Sustainable Development Goals (SDG) of United Nations Organization. While the G20 affirmed its commitment to implement the “G20 High-Level Principles for Digital Financial Inclusion”.
Historically however, in the Christian world, this growing consensus in favor of banking inclusion has been anything but self-evident as it took a great deal of time and effort to emerge. The aim of this chapter, in presenting the French case, is to show that for centuries, Christian thought, heir to Aristotle’s philosophy, prohibited interest-bearing loans to private individuals in order to avoid increasing the precariousness of the poor and notably serfdom in the event of inability to repay. Paradoxically, this prohibition of most of the population had the disadvantage of exposing the poor, obliged to borrow to the unlimited greed of usurers. Such exclusion in order to protect them soon proved to be counter-productive and damaging. The response of the local Catholic Church was therefore to develop in France the Monts-de-Piété (Christian charitable pawnshop) since 1637, in order to bank the poor, before the French authorities launched the Crédit Municipal network to replace the Monts-de Piété in 1918.
Governments continued over time to increase banking inclusion, for example in providing savings accounts by newly launched Caisses d’Epargne (savings institutions) in 1818. More recently, in the late 2000s and 2010s, European Union directives on means of payment and electronic money challenged the oligopoly formed by the major European banks, aiming at lowering the banking products and services costs and promoting the inclusion of individuals by fintechs.
The argument of this chapter proceeds in five parts. First, examination of banking world history which considers banking exclusion as the way to protect the poor. Second, the Mont-de-Piété (1637-1918) a catholic pawnshop solution in France to struggle against usury will be presented. Third, the transformation of Monts-de-Piété into Crédit Municipal and its practical consequences will be analyzed. Fourth, the creation of Caisse d’épagne (1818), a savings institution with a seminal role to educate the poor to the virtue of saving. Fifth will emphasizes on recent change in European environment since the 2010s through new European directives, the presentation of the Compte-Nickel’ case, and a quick overview of banking inclusion’s policy influence on banking stability.
Top1. In Antiquity And The Middle Ages, The Poor Were Protected By Being Excluded From Usury Loans And, Less Frequently, By Having Their Debts Cancelled
In this first section, we'll take a quick look at the role played by interest-bearing loans in some of the world's major civilizations.
The first interest-bearing loans in history appeared in the Middle East