A loan is a type of debt representing a contractual promise by a borrower to repay a sum of money in exchange for the promise by a lender to give another sum of money.
The history of loans can be traced back thousands of years at least, with basic forms of lending evident in ancient Greek and Roman civilizations. Lending remains a core activity of modern financial markets, with banks and other lenders offering many different types of loans to borrowers as diverse as individuals, commercial businesses, and governments. A well-functioning lending mechanism is essential for economic growth. That is particularly true in Europe, where businesses rely on bank lending far more than their US counterparts, which often bypass bank financing in favor of, for instance, issuing their corporate bonds.
While it's undoubtedly a fundamental part of both the banking business and the broader economy, lending is also inherently risky – more so than was generally recognized before the global financial crisis. Lending is now a matter of political and economic concern.
