The Effects on Capital Market Development

In this chapter, the authors analyze the functioning of private capital markets in Holland in the late medieval period. They argue that in the absence of banks and state agencies involved in the supply of credit, entrepreneurs' access to credit was determined by two interrelated factors. The first was protection of property rights and the extent to which properties could be used as collateral. The second was interest rates for borrowing money at the time, as well as the obligations of such borrowing compared with the interest rates on risk-free investments. The chapter’s case study is the small town of Edam and its surrounding countryside, De Zeevang, during the fifteenth and sixteenth centuries. The authors show that many households (whether headed by men or women) owned financial assets and/or debts, and the degree of financial sophistication was relatively high.