Ptolemaic Egypt (323–30 b.c.) developed a highly sophisticated system of warehouse banking based on corn, a traditional form of money in Egypt. The Egyptians applied the knowledge of Greek banking to scattered government granaries that dotted the landscape in every locality of any consequence, and turned them into a national network of corn banks with headquarters in Alexandria. Even after Greek coinage spread to Egypt with the conquest of Alexander the Great, corn remained an important standard of value in the feudal economy of Egypt. The government and rich merchants jealously hoarded coins and precious metals to finance foreign transactions. Lower- and middle-class Egyptians transacted business in the domestic economy with deposits in corn banks, habituating the entire population to using banks.
Originally, farmers stored their annual crop of corn in government granaries for safety and convenience. The government collected taxes in corn, which was also deposited in granaries. The Egyptians lumped corn of the same quality together in the granaries and learned to exchange the ownership of corn without the corn leaving the granary—the first step in the development of corn banking. The owners of the corn could pass written orders of withdrawal of corn to pay debts and taxes, or to purchase goods and services. By the time of the Ptolemies, Egyptians had become accustomed to paying debts through the bank, a practice that had the additional advantage of creating an official record of transactions that could be helpful in the event of litigation.
The Ptolemaic Egyptians developed the banking expertise to centralize the accounting and management of a nationwide network of corn bank granaries from one headquarters in Alexandria. The centralized accounting and management afforded depositors the ability to transfer funds to other regions, creating one of the first money transfer systems. A thousand years before the development of double-entry bookkeeping, the Egyptians developed a system of debit and credit entries and deposit transfers that made use of the grammar of their language. Credit entries fell under the genitive or possessive case, and the dative case stood for debit entries. Records show that often deposits were transferred from one account to another without corn leaving the granary. Referring to the bookkeeping principles, M. Rostovtzeff, in his Social and Economic History of the Hellenistic World, says “I have mentioned this detail in bank procedure, familiar in modern times, because many eminent scholars have thought it improbable that such transfers were made in ancient times.”
The grain bank network of Ptolemaic Egypt is the only banking institution of the ancient world that bears comparison with the greatest banks of the nineteenth and twentieth centuries. Sufficient records concerning the volume of accounts, number of branches, and employees are extant to form a picture of the vast influence it wielded over the Egyptian economy. In addition, the Ptolemies of Egypt probably deserve the distinction of being first to advance banking as a government enterprise.
The royal grain bank of Egypt demonstrates that precious metals are not a necessary component of a sophisticated monetary system. Any commodity that has a dependable market value can fill the role of a monetary standard. The annual flood of the Nile river helped stabilize corn production in Egypt and shield it from the whims of the weather, making the supply of corn sufficiently stable to form a monetary base.