Financial development comes in waves, often washing up in the same place, whether 17th century Holland or 18th century London. In the Late Middle Ages, the centers of European finance were largely in Italy. Many innovations in finance during this era, from bills of exchange to insurance and double-entry bookkeeping to public bonds, either originated in Genoa or were disseminated elsewhere through Genoa, a city on Italy’s Ligurian coast.


           Genoa was stuck with the limited natural resources available in Liguria. However, the winds and currents made the city an excellent location for a port. So, the sea became the source of much of Genoa’s employment and wealth. As just one example, shipbuilding created demand for an array of crafts, creating employment for craftsmen specialized in making sails, anchors, nails, and ropes.

           Whatever the role of shipbuilding, the most relevant dimension to Genoa’s economy for financial development was trade, which generated much of the city’s wealth and gave it a wider European importance. By the 14th century, Genoa was trading in spices with Egypt and in cloth with England and Genoese merchants and financiers found themselves in Spain and other destinations far from their Mediterranean home, like London, Bruges, and Antwerp.

           Trade offered high returns and captured a lot of investment, much of it raised through a commenda. A commenda was a partnership between investors and merchants, the former provided the money, the latter did the travelling and conducted business. Investors pooling capital for voyages would receive shares called loca, transferrable interests in a voyage, and these changed hands while ships were underway, creating something of a stock market.


           Of course, voyages could be dangerous and the threat of storms and pirates constituted the primary threat to profits. There were some means of mitigating the danger. Besides travelling in armed convoys or taking other preventative measures, there were forms of insurance. Among them were ‘sea loans’ which combined a credit and insurance instrument. Sea loans to a merchant, who might use the money to outfit a ship or purchase supplies or inventories, did not have to be repaid if the ship was lost.

           Marine insurance is one of the oldest forms of insurance and so, as a center for maritime trade, it isn’t surprising that Genoa became an early insurance center in the Mediterranean. Even there though, only perhaps a quarter of voyages were insured. Besides the sea loan, which required the merchant take a loan he might not have needed, insurance also took the form of a more conventional insurance policy.

           Involved in insurance contracts would have been notaries and their records show that insurance contracts could be quite specific. They specified the type of ship and its cargos, who the captain was, and what route would be taken. Also listed would have been the underwriters of course. However, at this time, there was not a dedicated insurance industry per se, even if there was an insurance market.

           Most insurance underwriters were merchants themselves. There usually were several involved in a particular transaction as insurance policies were underwritten by syndicates so that an underwriter’s individual exposure might be manageable. Records show that fewer than 15% of contracts seem to have involved just one or two underwriters.

Public Debt

           Besides representing fractional shares in voyages, loca would represent pieces of the public debt. Genoa used several forced loans as a means to raise money, often for wars. However, the wealthy would often take up the contributions required of those who could not afford to meet their share of the loan and this meant that the loans still had to be appealing on their merits. The city also raised money on a voluntary basis.

           To service this debt, new taxes called gabelle were instituted. These were usually taxes on specific goods like salt, wheat, or wine. The government would sell rights to future tax collections by issuing compera and outsourcing the collection of taxes to private individuals. The compera were divided into loca, also known as luoghi. Holders of luoghi were entitled to receive all of these tax revenues and not only a specified constant rate. Interest rates paid on 15th century luoghi ranged from 4% to 10%. Luoghi were freely transferable and so Genoa had a full-fledged bond market in the Late Middle Ages.

           Merchants, bankers, and the wealthy would speculate in these bonds. They were also used by wealthy property-owners to leave wealth to widows or heirs. Luoghi could only be seized in few scenarios and these did not include seizure to satisfy personal debts. Their use in inheritances was enhanced by their divisibility; as such, they could allow an estate to be divided more evenly than discrete real estate properties would allow and were useful in funding dowries and annuities. Such a link between the public debt and inheritances, specifically the creation of an instrument by which to support widows and orphans, was found almost everywhere in Europe where governments borrowed.

Casa di San Giorgio

           An institution at the core of Genoa’s system of public finance was the Casa di San Giorgio. This was a bank located in the city’s customs house, the Palazzo San Giorgio. Established in 1407, the Casa di San Giorgio gradually consolidated the state debt over the next fifty years or so. It was a corporate entity managing the public debt and representing the state’s creditors. Genoa’s government would turn to the bank when raising fresh money by a loan. As the state struggled to pay its debts, the Casa di San Giorgio also received control of lands. The political scientist Niccolò Machiavelli wrote that the Casa di San Giorgio controlled most of the lands and cities of the Genoese Empire, which included Corsica and lands in Italy, Cyprus, and Crimea.

Palazzo San Giorgio, Genoa

           There was also a market for what was called ‘paghe’ which were interest payments on the luoghi. Interest was often paid irregularly so a market formed where people could expend with their paghe when they wanted rather than when the bonds finally made their interest payment. The Casa di San Giorgio managed a payment system by recording transfers of paghe in ledgers; the paghe were used as a type of bank money.

           The Casa di San Giorgio administered most of the gabelle instituted to pay interest on the debt, outsourcing the collection to subcontractors called gabellotti. The gabellotti could make their payment of taxes collected, at least partially, in paghe trading in the market, usually at a discount. In this way, by withdrawing paghe from circulation, interest payments were defeased against tax revenues without actually paying them in full in cash.


           The Casa di San Giorgio was not a conventional bank in the modern sense. That took considerable time to form. Banking activities existed in Genoa in the mid-12th century but became more important only starting in the second half of the 13th century. Bankers may have gotten their start as tradesmen, like silversmiths, who by virtue of their trade could assay and thus verify the value of various metal coins of differing origins, compositions, and conditions. They naturally extended into exchanging currencies and bankers came to serve long-distance trade.

           Deposit banking eventually took root but the main service of Genoese bankers was transferring money via a bill of exchange. Bankers transferred money across time and place by allowing bills to be paid in different cities than where they were bought. A local merchant travelling to a medieval fair in France’s Champagne to buy products could transfer funds from Genoa to Champagne by purchasing a bill of exchange from a local banker. Once he arrived, he could present his bill for payment and receive money in local currency. Thus, Genoese bankers facilitated commerce at medieval fairs.

           What came of Genoa? The city is not known as a financial center today and has not for centuries. As it happens, what had been a source of security became a source of ruin. Genoa was protected by the Spanish and so did not suffer from military defeats as Venice had when its power was declining. However, at the same time, Genoa became a large creditor to Spain and so the city was ruined by Spanish bankruptcies in the 17th century.


           Genoa developed a financial system that served not only the city and its merchants. The innovations in insurance, banking, and other areas that were pioneered or perfected in Genoa were put to use elsewhere and outlived the city’s role as a major financial center.

           While financial centers are often found in the capital cities of large nations, this is not a requirement, as shown by the example of Genoa, or for that matter Amsterdam, Zurich, or Hong Kong in other eras. Any city can benefit from innovations made elsewhere and much of what was built in Genoa was not lost when the city ceased to be a center for finance, rather it was transferred elsewhere where the practices of financiers and insurers continued to be perfected.

More from the Tontine Coffee-House

           Read more about the Banco di San Giorgio, how bills of exchange supported medieval trade, and the public borrowing costs of Genoa and Venice. Consider subscribing to this blog’s newsletter here.  

Further Reading

1.     Beneš Carrie E. A Companion to Medieval Genoa. Brill, 2018.

2.     Doosselaere, Van Quentin. Commercial Agreements and Social Dynamics in Medieval Genoa. Cambridge University Press, 2009.

3.     Homer, Sidney, and Richard Eugene Sylla. A History of Interest Rates. Wiley, 2005.

4.     Miner, Jeffrey. “Profit and Patrimony: Property, Markets, and Public Debt in Late Medieval Genoa.” Business History Review, vol. 94, no. 1, 2020, pp. 73–94.

Comments (1)

  1. Ken Romanowski


    Fascinating read, Daniel! I have a question, but will send it privately.

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