Interest in lending still driving business
In medieval Italy, charging interest was considered a sin according to Catholic values. In order to save themselves from criticism, the Medici family used the money to build churches and cathedrals. As the demand for art to adorn the churches grew, the Renaissance began.
Today, the financial industry is dominated by the United States, but the banking business originated in Italy. The word “bank” came from “banco,” an Italian word for a bench - because the only structures that could be found in the banks were benches.
The essence of the financial industry is to lend money and collect interest and fees. Nevertheless, the act of charging interest is perceived quite negatively both in the West and the East. Islam prohibits charging interest on loans.
In the Bible, there are passages that discourage the practice. Leviticus 25:37 says: “You must not give him money at interest or sell him food at a profit.”
In economics, interest is the cost of borrowing money from others. At present, the highest interest rate in the Korean financial establishment is the 44 percent annual interest charged by consumer lenders. Last month, ruling and opposition lawmakers attempted to lower that to 30 percent, but the government opposed the plan.
The government and the National Assembly compromised on 39 percent and the vote is to take place in the special session in June. The government argues that if the rate is lowered drastically, consumer lenders will divert the money to the private lending market and borrowers will suffer even more.
In the mid-1980s, the Japanese government made a similar move, and 94 percent of consumer lenders went underground. Some of the private lenders came to Korea to take advantage of the difference in interest rates, and it is said that Korea has since become a playground for yakuza (Japanese mafia) and their money lending business.
*The writer is an editorial writer of the JoongAng Ilbo.
By Shim Shang-bok