Banking on God

GUEST POST: Was the Dutch Reformed Church South Africa's first bank?

In the seventeenth and eighteenth centuries, credit was indispensable. But the Cape Colony’s first bank – the Lombard Bank – was only established in 1793. Instead of a formal financial intermediary, the Cape populace sought other, informal ways of accessing credit, using their social networks to loan money from each other. But borrowing money from friends and family – Shakespearian warnings to ‘neither a borrower nor a lender be’ notwithstanding – was not the only option for colonial Capetonians. Without a formal bank, another institution – perhaps somewhat unlikely considering Old Testament injunctions against usury – became an important source of credit: the Dutch Reformed Church.

While the Dutch Reformed faith was brought to South Africa aboard the Dromedaris, the Rejiger and De Goede Hoop in 1652, it was only thirteen years later that the nascent settlement was deemed large enough by the VOC to require its first permanent minister. With the arrival of Reverend Jan van Arckel in 1665, the organisational structures of the church could now be put in place: the church council. Under the ever-watchful eye of the VOC Council of Policy, the consistory had primary control over all religious observances, education and poor relief at the Cape.

As the role of the deacons within the church council was to serve others, the maintenance of the poor fund fell on their shoulders. Exhortations in sermons to ‘remember the poor’ ensured a steady income from the collection plate. These regular donations were supplemented by a system of poor boxes, strategically placed in taverns around the foreshore. Wealthy burghers – like the settlement’s second commander, Zacharias Wagenaer – often left large legacies to the poor fund. Newlyweds would make gifts of money in celebration of their marriage. The deaconry even sold grave plots in the churchyard and rented seats in the church to raise more funds for the poor and needy.

By the end of VOC rule, the capital of the Cape Town poor fund stood at over 300,000 gulden, an enormous amount. But charitable donations (and a few side hustles) alone cannot account for the remarkable wealth amassed by the Cape Town church council over the course of the eighteenth century.

Luckily, the deaconry (with the help of the Company’s accountants) kept the church’s account books in good order. These kasboeke (cash books) make up some of the oldest documents in the Dutch Reformed Church Archives at Stellenbosch. These rich sources form the basis of my current research project as postdoctoral research fellow attached to LEAP, where I explore the economic life of the church in eighteenth-century Cape Town.  

From the deaconry’s accounts, it’s clear that the bulk of the poor fund capital came not from the collection plate, but from loans that were frequently extended to burghers. In the annual summaries of the church’s accounts sent to the Council of Policy, more than half of the consistory’s income came from the interest accrued on loans to the Cape populace.

Lines of credit were not only extended to individuals. On at least two occasions – in 1666 and again in 1749 – the VOC government at the Cape loaned several thousand gulden from the poor fund. The Burgher Wachthuis was built in 1755 with money borrowed from the church.

The loans were (usually) extended at 6 per cent interest. This interest rate was likely based more on Calvinist dogma than market forces. In John Calvin’s quest to infuse all aspects of life with faith extended to economic practices, interest rates did not go unnoticed. The reformer was apparently suspicious of interest rates over 6 per cent!

While the interest accrued on the loans may have been influenced by theological forces, other aspects were based on more practical considerations.

In order to ensure that the poor fund capital was not risked unnecessarily, the loans had to be secured against collateral. It was Albert van Breugel – who served on the church council as the government representative – who first decreed, in October 1674, that loans had to be secured against property which was not liable to fire risks. According to his report to the Cape government, ‘some considerable sums’ had been ‘been secured by house property only, which, if destroyed by fire, would entail loss, as the ground alone would not in value cover the bond’. As the goal of the loans was to generate more funds for poor relief, it would not do to risk unnecessarily the poor fund capital.

However, a decade later, Commissioner Hendrik van Rheede found that the poor fund capital was still being loaned in insecure ways. This time, it seems, the danger was not from fire destroying the securities. The ‘incorruptible’ Van Rheede had been sent out by the Lords XVII to investigate corruption in several of the Company’s holdings. From 1685, the full church council – including the elders, the deacons and the vice-governor – had to give their unanimous approval before any money could be loaned. This, the commissioner said, was to prevent any deacon from extending credit under his own authority. It is not a huge stretch of the imagination to put two and two together and infer that there were some members of the deaconry who extended credit as a way to curry favour.

In 1717, the church councils of Drakenstein and Stellenbosch both applied (via the Council of Policy) to loan funds from the Cape Town consistory to build new churches. The Cape Town consistory was reluctant to provide the capital as they were well aware of the expensive nature of building a church. The construction of the first stone church located outside the walls of the Castle had cost the Cape Town deaconry dearly. So much so that, in 1703, the poor fund coffers were empty, necessitating a loan of 4 000 gulden from the Council of Policy.

After much back-and-forth debate between all parties, Drakenstein borrowed 8 000 gulden and Stellenbosch 4 000 gulden. The main sticking point for the Cape Town church council was that the rural congregations apparently expected that the money would be given without charging interest as a charitable service to sister congregations.

The rural church councils argued that they were much smaller than their urban counterpart, and their respective poor funds much smaller. The Stellenbosch poor fund stood at 7 475 gulden and the poor fund of Drakenstein only 5 483 gulden. By comparison, the Cape Town poor fund stood at over 130 000 gulden. Their poor funds would be ruined if they had to bear the burden of replaying the loans with interest, they reasoned.

It took many years before the initial capital was repaid.

Despite these pitfalls, the immense wealth of the Cape Town diaconate poor fund was built by extending credit at interest. Through these loans, some 130 years before the Lombard Bank opened its doors, the church functioned as the Cape’s first bank. But this was only one facet of the church’s economic role that my research has uncovered. The church’s monopoly on poor relief for most of the VOC period (thanks in part to its close association with the VOC government) positioned the deaconry as an unlikely but influential economic institution in eighteenth-century Cape Town.

‘Banking on God’ was first published on Our Long Walk. Support more such writing by signing up for a paid subscription. The image was created with Midjourney v5.2.