Interest in the Ottoman Empire: Money Foundations
Researchers frequently discuss money interest in Ottoman society and the state’s approach to interest and publishing articles on the subject. In this context, we need to state that money interest in the Ottoman has a wide range of topics. This article will discuss just a part of this broad subject and some points about cash waqfs.
Accordingly, foundations have an important place in Islamic society. In addition, cash foundations are highly developed institutions for modern society. Historically, the importance of foundations stems from the fact that they tell us how East and West view institutions and legal entities. Because while Eastern civilizations arranged their institutions according to foundations property that has a legal personality, on the contrary, the associations seen in Roman Civilization presented a different structure.
The foundation establishment, defined as property and legal entity, has existed since the first ages of Islam and developed over time. Eventually, it had reached its most developed methods in the Ottoman period.
We can describe the function of the foundations in the state as follows: Someone rich person asks the poor widows in his town to be paid a regular salary every three months to prevent them from being abused. For this reason, he decides to establish a foundation. He donates an income-generating property for this work. Kadi writes foundations manager made social security payments in the foundation’s specification in detail. Katips record possible revenues in their places in the budget. Official authorities certify the document.
As you can see, there must be a social security problem to establish a foundation. Thus, foundations work as social security institutions and have been set for services such as education, municipal work, or professional solidarity institutions to help them. In short, foundations were in every field. Merely the only important thing is that every foundation must have an income-generating asset.
Also, because of this necessity, the Foundations were founded on immovable assets in the early days. However, the changing conditions had created some debates about what the income-generating property of the foundations will be. The military power focuses, which earn income from all over the country as a result of both the utilization of the securities accumulation brought about by the developing trade and the expanding borders, had to donate with a different capital structure in the new period. When the Ottoman Empire was growing, Ottomans obtained wealth from vast geography, and there was also a growing trade with Europe. This situation had increased monetization. Thus the use of money that goes down to the villages has also been reflected in the documents.
The increasing use of money and the fact that wealth consists of more commercial commodities rather than real estate changed the values donated to foundations. As a result of these conditions, the Ottoman society started applying a method left before. Thus, money foundations, the first applications of which we can see in the Murat II era, will meet such a market’s needs. Their contribution had been excellent in terms of both being practical and supporting trade.
Money foundations, established at least in the Murat II era and developed by Sultan Mehmet the Conqueror and matured in Suleiman the Magnificent era, existed in all large and medium-grade cities over time. Parallel to the economic growth of the Ottomans, the total investment they finally received in the period of Kanuni had exceeded the real estate-based foundations if we put aside the large state foundations.
At this point, the question of how money foundations had worked reveals the crucial moment. In these foundations, the benevolent investor devotes money, namely silver and gold coins (some researchers point out that commercial items to cash can also be donated to foundations). Foundations management can operate these cash values in two different ways: doing trade at risk or lending money to a trader with interest.
Foundations especially have to work by guaranteeing their income in the very, very long term, theoretically until doomsday. At this cause, they cannot trade due to their risks because trading puts the money at risk. Doing risky business is against the logic of the foundation. Therefore foundations go after rent, not profit.
Thus as clearly stated in their legal documents, monetary foundations give a commercial loan to a merchant and a consumer loan to an individual by mortgaging a value in return for the security they provide. However, I should state that these foundations do not give cash to the applicant under any circumstances. So individuals go-to foundations, have the houses, ships, and raw materials they want to buy from these money foundations on their behalf, and these foundations sell them on a term basis. Thus experts of the time had seen interest as a business profit.
Thereby, money foundations reveal an old version of the Sukuk financing bill, similar to interest-free banking in today’s banking practices. Operations of foundations provide financing for the actual supply and demand of goods. In this respect, it does not contain the disadvantages of today’s interest practices.
Last of all, without pursuing a religious conclusion with the monetary foundations, it would be correct to say that the Ottoman State lived with a very pragmatist administration and a social structure that feeds this very well. In this respect, Ottomans have used all the blessings of money foundations to the finest detail.
Note: The first version of this post was posted on April 13, 2014 on a different blog.
