Editing Interest (section)

==History==
{{further|Compound interest#History}}

Credit is thought to have preceded the existence of coinage by several thousands of years. The first recorded instance of credit is a collection of old [[Sumer|Sumerian]] documents from 3000 BC that show systematic use of credit to loan both grain and metals.<ref name=":0">{{Cite book |last=Sylla |first=Richard |title=A History of Interest Rates |publisher=Wiley |year=2011 |isbn=9781118046227 |pages=17 |language=English}}</ref> The rise of interest as a concept is unknown, though its use in Sumeria argue that it was well established as a concept by 3000BC if not earlier, with historians believing that the concept in its modern sense may have arisen from the lease of animal or seeds for productive purposes.<ref name=":0" /> The argument that acquired seeds and animals could reproduce themselves was used to justify interest, but ancient Jewish religious prohibitions against [[usury]] (נשך ''NeSheKh'') represented a "different view".<ref>[[Paul Johnson (writer)|Johnson, Paul]]: ''A History of the Jews'' (New York: HarperCollins Publishers, 1987) {{ISBN|0-06-091533-1}}, pp. 172–73.</ref>

The first written evidence of compound interest dates roughly 2400 BC.<ref name=bbc-th>{{cite web|url=https://www.bbc.com/news/business-39870485|title=How the world's first accountants counted on cuneiform|publisher=BBC World Service|date=12 June 2017|access-date=10 December 2018|archive-date=27 May 2023|archive-url=https://web.archive.org/web/20230527193002/https://www.bbc.com/news/business-39870485|url-status=live}}</ref> The annual interest rate was roughly 20%. Compound interest was necessary for the development of agriculture and important for urbanization.<ref>{{cite journal|url=https://www.businessinsider.com/compound-interest-is-responsible-for-modern-civilization-2013-6|title=A Simple Math Formula Is Basically Responsible For All Of Modern Civilization|journal=Business Insider|date=5 June 2013|access-date=10 December 2018|archive-date=11 December 2018|archive-url=https://web.archive.org/web/20181211052755/https://www.businessinsider.com/compound-interest-is-responsible-for-modern-civilization-2013-6|url-status=live}}</ref>{{dubious|date=June 2019}} 

While the traditional Middle Eastern views on interest were the result of the urbanized, economically developed character of the societies that produced them, the new Jewish prohibition on interest showed a pastoral, tribal influence.<ref>{{Cite book|url=https://books.google.com/books?id=YxtNAwAAQBAJ|title=You Shall Not Steal: Community and Property in the Biblical Tradition|last=Gnuse|first=Robert|date=2011-08-05|publisher=Wipf and Stock Publishers|isbn=9781610975803|language=en}}</ref> In the early 2nd millennium BC, since silver used in exchange for livestock or grain could not multiply of its own, the [[Laws of Eshnunna]] instituted a legal interest rate, specifically on deposits of [[dowry]]. Early Muslims called this ''riba'', translated today as the charging of interest.<ref>{{Cite web|title = Institute of Islamic Banking and Insurance - Prohibition of Interest|url = http://www.islamic-banking.com/prohibition_of_interest.aspx|website = www.islamic-banking.com|access-date = 2015-10-12|archive-date = 2018-06-21|archive-url = https://web.archive.org/web/20180621030616/http://www.islamic-banking.com/prohibition_of_interest.aspx|url-status = dead}}</ref>

The [[First Council of Nicaea]], in 325, forbade [[clergy]] from engaging in [[usury]]<ref name="m6">Conrad Henry Moehlman (1934). The Christianization of Interest. Church History, 3, p 6. doi:10.2307/3161033.</ref> which was defined as lending on interest above 1 percent per month (12.7% [[Annual equivalent rate|AER]]). Ninth-century [[ecumenical council]]s applied this regulation to the [[laity]].<ref name="m6"/><ref name="noonan">Noonan, John T., Jr. 1993. "Development of Moral Doctrine." 54 Theological Stud. 662.</ref> [[Catholic Church]] opposition to interest hardened in the era of the [[Scholasticism|Scholastics]], when even defending it was considered a [[heresy]]. St. [[Thomas Aquinas]], the leading theologian of the [[Catholic Church]], argued that the charging of interest is wrong because it amounts to "[[Usury#Usury in scholastic theology|double charging]]", charging for both the thing and the use of the thing.

In the [[medieval economy]], loans were entirely a consequence of necessity (bad harvests, fire in a workplace) and, under those conditions, it was considered morally reproachable to charge interest.{{Citation needed|date=January 2009}} It was also considered morally dubious, since no goods were produced through the lending of money, and thus it should not be compensated, unlike other activities with direct physical output such as blacksmithing or farming.<ref>{{Cite web |url=http://www.uh.edu/engines/epi2547.htm |title=No. 2547: Charging Interest<!-- Bot generated title --> |access-date=2010-01-11 |archive-date=2011-05-03 |archive-url=https://web.archive.org/web/20110503175913/http://www.uh.edu/engines/epi2547.htm |url-status=live }}</ref> For the same reason, interest has often been looked down upon in [[Muslim World|Islamic civilization]], with almost all scholars agreeing that the Qur'an explicitly forbids charging interest.

Medieval jurists developed several financial instruments to encourage responsible lending and circumvent prohibitions on usury, such as the [[Contractum trinius]].

[[Image:UsuryDurer.jpg|upright|thumb|Of [[Usury]], from [[Sebastian Brant|Brant's]] ''Stultifera Navis'' ([[Narrenschiff|the Ship of Fools]]); [[woodcut]] attributed to [[Albrecht Dürer]]]]
In the [[Renaissance]] era, greater mobility of people facilitated an increase in commerce and the appearance of appropriate conditions for [[entrepreneur]]s to start new, lucrative businesses. Given that borrowed money was no longer strictly for consumption but for production as well, interest was no longer viewed in the same manner.

The first attempt to control interest rates through manipulation of the [[money supply]] was made by the [[Banque de France]] in 1847.{{Citation needed|date=April 2016}}

===Islamic finance===
{{main|Islamic banking and finance}}
The latter half of the 20th century saw the rise of interest-free [[Islamic banking and finance]], a movement that applies Islamic law to financial institutions and the economy. Some countries, including Iran, Sudan, and Pakistan, have taken steps to eradicate interest from their financial systems.<ref>{{Cite journal |last1=Anwer |first1=Zaheer |last2=Khan |first2=Shabeer |last3=Abu Bakar |first3=Muhammad |date=2020-01-01 |title=Sharīʿah-compliant central banking practices: lessons from Muslim countries' experience |journal=ISRA International Journal of Islamic Finance |volume=12 |issue=1 |pages=7–26 |doi=10.1108/IJIF-01-2019-0007 |s2cid=216217732 |issn=0128-1976 |doi-access=free }}</ref> Rather than charging interest, the interest-free lender shares the risk by investing as a partner in profit loss sharing scheme, because predetermined loan repayment as interest is prohibited, as well as making money out of money is unacceptable. All financial transactions must be asset-backed and must not charge any interest or fee for the service of lending.

===In the history of mathematics===
It is thought that [[Jacob Bernoulli]] discovered the mathematical constant ''[[E (mathematical constant)|e]]'' by studying a question about [[compound interest]].<ref name="OConnor">{{cite web|url=http://www.gap-system.org/~history/PrintHT/e.html|title=The number ''e''|publisher=MacTutor History of Mathematics|first1=J J|last1=O'Connor|first2=E F|last2=Robertson|url-status=dead|archive-url=https://web.archive.org/web/20080828163224/http://www.gap-system.org/~history/PrintHT/e.html|archive-date=2008-08-28}}</ref> He realized that if an account that starts with $1.00 and pays say 100% interest per year, at the end of the year, the value is $2.00; but if the interest is computed and added twice in the year, the $1 is multiplied by 1.5 twice, yielding $1.00&times;1.5<sup>2</sup>&nbsp;=&nbsp;$2.25.

Bernoulli noticed that if the frequency of compounding is increased without limit, this sequence can be modeled as follows:

: <math>\lim_{n \rightarrow \infty} \left( 1 + \dfrac{1}{n} \right)^n = e,</math>

where ''n'' is the number of times the interest is to be compounded in a year.