FINANCIAL INSTITUTIONS 
BANKS 
It is but forty five years since the first bank was founded in Ice- 
land. Up to that time money transactions were almost unknown in the 
country, and merchants were the chief lenders. All trade was of the 
nature of barter, and the people obtained foreign goods through ex- 
change for home products, the merchants having to allow delay of 
payment until these commodities were ready for the market. It was, 
of course, understood that the customer should have cleared off all his 
debts before the end of the year, but in practice this was by no means 
always the fact. On the other hand, the customer not infrequently had 
a balance at the merchant's on which he was usually allowed some 
interest. 
Almost all trade was in the hands of foreign (Danish) merchants 
and carried on with foreign capital and credit. In 1874 Iceland ob- 
tained financial independence, and about the same time a native mer- 
chant class began to develop. Various measures were taken by the legis- 
lature to stimulate productive effort and trade, the most important 
being the founding of a bank. The bad years immediately following 
after 1880 made this step so urgently necessary that in 1885 a law 
was passed under which a National Bank was established. commenc- 
ing business the following year. 
About this time (1885) the population of Iceland numbered some 
70 000, more than three-fifths of whom lived by farming, whereas 
comparatively very few persons were permanently engaged in sea-fish- 
ing which was still carried on exclusively in open boats. The revenue 
of the Stale amounted to something less than half a million krénur, 
while the imports and exports together were valued at ten million 
krénur. But since that time there has been an enormous progress in 
the ecenomic life of the nation, chiefly due to the great development 
of the fisheries to which a new stimulus was given when just after