In this paper we analyse the functioning of private capital markets in Holland in the late medieval period. We argue that in the absence of banks and state agencies involved with the supply of credit, entrepreneurs access to credit was determined by two interrelated factors. The first was the quality of property rights protection and the extent to which property could be used as collateral. The second was the level of interest in borrowing money at the time, as well as such borrowing compared with the interest rates on risk-free investments. For our case study, the small town of Edam, and its hinterland, De Zeevang, in the fifteenth and sixteenthcentury, we demonstrate that properties were used as collateral on a large scale, and that interest rates on both small and large loans were relatively low (about six per cent). As a result, many households (whether headed by men or women) owned financial assets and/or debts, and the degree of financial sophistication was relatively high.

Mortgage markets in developing economies, both past and present, are often confined to social networks between private individuals. The inadequate registration of ownership of and encumbrances on borrowers' real estate has been offered as a reason for this, but it is questionable whether such registration provides either a simple or a complete explanation. This paper analyses mortgage markets between 1300 and 1800 in the Low Countries, where such registration was organised well, and England, where such registration was poorly organised. These historical cases show that registration was important for the emergence of broad mortgage markets but in the historical context successful markets took considerable time to appear. The rise of such markets also required changes in the mortgage laws and often depended on intermediaries for matching borrowers and lenders.

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Rural law courts are sometimes believed to have contributed to juridical fragmentation, which led to coordination failures and, hence, to high transaction costs. We present a case study of the village law court of Mijnsheerenland, and pay particular attention to the question of whether non-residents expected villagers to have a ‘home court’ advantage. Our analysis of default risk premiums demanded by participants in various exchanges does not indicate this was the case. We argue that this was caused by one of the peculiarities of the juridical system of Holland, which was fragmented but nevertheless uniform because of the dominance of public courts under central control of the ruler.

Although the importance of New Institutional Economics and the institutional approach for understanding pre-industrial economic development and the early growth of markets are widely accepted, it has proven to be difficult to assess more directly the effects of institutions on the functioning of markets. This paper uses empirical research on the rise of markets in late medieval Holland to illuminate some of the factors behind the development of the specific institutional framework of markets for land, labour, capital and goods, and some effects of these institutions on the actual functioning of the markets. The findings are corroborated by a tentative comparison with the functioning of markets in Flanders and eastern England.