Banking Growth and Industry Financing in Spain during the Nineteenth Century

This article analyses, from a micro-regional perspective, the origins of the Spanish financial system during the early stages of industrial change in the nineteenth century. Alcoi, one of the largest industrial districts in Valencia, which specialised in woollen production, is used as a case study for understanding the relationship between industrial growth and the financial system. The goal of this article is to show how the late emergence of a modern bank system, represented by the joint-stock banks, was offset by the prevalence of informal and local credit markets during much of the period up to 1914. Three main insights are offered. First, this article shows the great value of trust and personal knowledge among agents acting in local networks. Secondly, it analyses the main financial mechanisms used by the firms, which were usually family firms, such as private credit, trade credit and the reinvestment of profits. Finally, it highlights the rise of family bankers and their role in financing industry in the region.