Contractum trinius
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A contractum trinius was a set of contracts devised by
To get around this, a set of three separate contracts were presented to someone seeking a loan: an investment, a sale of profit and an insurance contract. Each of these contracts were permissible under canon law, but together replicated the effect of an interest-bearing loan.
The way this procedure worked was as follows: The lender would invest a sum equal to the amount of financing required by the borrower for one year. The lender would then purchase insurance for the investment from the borrower, and finally sell to the borrower the right to any profit made over a pre-arranged percentage of the investment. This system replicated the effects of a loan with any interest rate agreed between the two, yet provided protection to the lender against default, while the borrower remained under the protection of the law when it came to collection of the money by threats or force (loan sharking).
The Church proved utterly unable to legislate against the contractum trinius, and the idea quickly spread to merchants and bankers across
Some Muslims are of the view that the present practice of
See also
- Christian finance
- Discretionary deposit
- Round-tripping (finance)
- Substance over form
- Islamic finance