The history of modern banking is quite rich and dates way back in time. Several entities and civilizations have been credited for their contributions towards the development of modern banking systems and the variety of services provided by banks today. The Knights Templar played a significant role in the introduction and diversification of banking services provided to clients.
Established in the early 12th century, the Order of the Knights Templar created an institution that is considered to be among the first banking facilities to provide a diverse range of modern banking services.
The Knights Templar were made up of a team of devout Christians whose primary mission was to provide protection to European pilgrims who would travel to the Holy Land to fulfill their commitment and devotion to the Holy Scriptures. The order would also occasionally conduct military operations with the aim of securing and protecting pilgrims and Christians. The Knights Templar were and still are considered to have been really good at banking for a number of reasons.
One of the traits of a good banker is identifying an opportunity and taking advantage of it. This is exactly what the Knights Templar did at the beginning of their operations. The 637 Siege of Jerusalem which led to the Muslims taking control of the city caused some major problems to the pilgrims who would occasionally travel to the city to fulfill their devotion to Christianity.
In order to provide protection to the pilgrims, the Order of the Knights Templar was established in Jerusalem in 1118. They were revered due to their commitment to their religion and willingness to die in the line of duty. The knights accrued a considerable amount of wealth over several years and started providing banking services in the region.
Besides the Muslim control of Jerusalem, another challenge that pilgrims faced was the bandit issue. As the number of pilgrims visiting Jerusalem grew, bandits would take advantage of them and rob them of their money en route to the city. This is often considered the basis on which the Knights Templar started delivering their banking services. In order to put a stop to the muggings, the Knights Templar came up with a service that would ensure the pilgrims didn’t have to carry their money along.
This was the key.
The Knight Templars had access to many castles, cathedrals, monasteries, and chateaus throughout Europe, which served as a safe place for them to store valuables like gold, silver, documents, etc. Most of the castles were public domain knowledge so to speak, and the rest were off-the-record locations known only to the Order. Without this network, the Order would not have been able to take deposits.
Through the service, pilgrims were allowed to deposit their valuables in a Templar house located in their home area. They would then be issued letters of credit that they would present in the Templar house located at their destination. As a measure of preventing fraud, the letters were ciphered using a Maltese Cross based cipher alphabet.
The letter would be presented to the Templars as a means of withdrawing the funds from their accounts. This move greatly contributed to the safety of the pilgrims and other Christians as they didn’t have to carry money along the journey.
The invention of ancient day Hawala (or Hundi), except, it came with an Arabic-sounding name rather than a Christian name!
Another reason the Hawaldars, aka the Templar Knights, were so good at banking was the fact that they did not fear taking risks. After success with their initial banking services, the Templar Knights grew more powerful and so did their involvement in banking. Credit services are among some of the many services they incorporated into their new system. They offered loans to finance various activities such as the acquisition of property and financing of wars with their Paris based headquarter.
The survival and success of the Templar Knights was largely possible due to their cleverness. For instance, the church had forbidden the lending of money for interest. This, however, was not an obstacle for the Order.
One way through which they were able to make profits from the money they lent people was by retaining rights to the production of a mortgaged property. In some cases, they would charge rent – which was not forbidden – instead of charging interest.
The Templars also brokered deals for the acquisition of property such as land. To ensure that they were trustworthy, they would ensure that the property owner got paid in full. There are various other banking services that the Templar Knights provided before they were abolished. Research indicates that the services they provided laid the foundation of modern banking as we know it.
These banking services were brought down by King Philip who was in great debt to them. He had them arrested and confiscated their assets. After a period of theocratic suppression, they were forced out of business.
There are plenty of documentaries on YouTube regarding Knight Templars and Banking. Some of them are conspiracy theory type, so avoid those, but there are a few decent ones – highly recommended. Just to be neutral on the matter, I won’t be promoting or recommending any particular video.