The Interest-Free Instruments Used for Public Borrowing in the Ottoman Empire and Medieval Europe: A Comparative Perspective

Abstract

Borrowing is not only a practice of individuals and corporations, but the states also borrow to afford their expenditures. Similar to individuals, the states have borrowed since ancient times. Most of such loans have been at interest. However, the authorities have restricted or prohibited interest-based lending in various societies. Thus, the city-states of Medieval Europe and the Ottoman Empire could not always use ordinary borrowing instruments due to the prohibition of interest. Since, in recent years, the modernized forms of the early interest-free public borrowing methods are being asserted to be used by modern economies as well, the paper evaluates the methods used by the European city-states and the Ottoman Empire. At first, rentes and compera, the public borrowing methods used by city-states in Medieval Europe, are presented. Then, iltizam, malikane, and esham, the instruments used by the Ottoman Empire, are introduced. Lastly, the similarities and discrepancies among these interest-free methods utilized by the city-states and the Ottoman Empire are scrutinized.

Keywords

• Esham
• Interest-free public borrowing
• Rentes

The Interest-Free Instruments Used for Public Borrowing in the Ottoman Empire and Medieval Europe: A Comparative Perspective

Abstract

Borrowing is not only a practice of individuals and merchants, but the states also borrow to afford their expenditures. Similar to individuals, the states have borrowed since ancient times. Most of such loans have been at interest. However, the authorities have restricted or prohibited interest-based lending in various societies. Thus, the city-states of Medieval Europe and the Ottoman Empire could not always use ordinary borrowing instruments due to the prohibition of interest. Since, in recent years, the modernized forms of the early interest-free public borrowing methods are being asserted to be used by modern economies as well, the paper evaluates the methods used by the European city-states and the Ottoman Empire. At first, rentes and compera, the public borrowing methods used by city-states in Medieval Europe, are presented. Then, iltizam, malikane, and esham, the instruments used by the Ottoman Empire, are introduced. Lastly, the similarities and discrepancies among these interest-free methods utilized by the city-states and the Ottoman Empire are scrutinized.

Keywords

• Esham
• Interest-free public borrowing
• Rentes

References

1. Barkan, Ö. L. (1953). H. 933-934 (M. 1527-1528) mali yılına ait bir bütçe örneği. İstanbul Üniversitesi İktisat Fakültesi Mecmuası, 15(1–4).
2. Calder, R. (2016). God’s technicians: Religious jurists and the usury ban in Judaism, Christianity, and Islam. European Journal of Sociology, 57(2), 207–257. https://doi.org/10.1017/S0003975616000096
3. Cezar, Y. (1986). Osmanlı maliyesinde bunalım ve değişim dönemi: XVIII. yy dan Tanzimat’a mali tarih. Alan Yayıncılık.
4. Çizakça, M. (1999). Osmanlı İmparatorluğu’nda İç Borçlanmanın Evrimi: XV. Yüzyıldan XIX. Yüzyıla. Yeni Türkiye Dergisi Osmanlı Özel Sayısı: Ekonomi ve Toplum, 32, 223–226.
5. Çizakça, M. (2016). Eshamın Modernizasyonu, Finansal İçerme, İç Tasarruflar ve Ekonomik Büyüme. Availabale at Https://Www.Academia.Edu/25298625.
6. Felloni, G. (2010). A Profile of Genoa’s “Casa di San Giorgio”(1407-1805): A Turning Point in the History of Credit. Rivista Di Storia Economica, 26(3), 335–346.
7. Ferguson, N. (2006). Political risk and the international bond market between the 1848 revolution and the outbreak of the First World War 1. The Economic History Review, 59(1), 70–112.
8. Fritschy, W. (2009). State formation and urbanization trajectories: State finance in the Ottoman Empire before 1800, as seen from a Dutch perspective. Journal of Global History, 4(3), 405–428.

9. Genç, M. (1995). Esham. In İslam Ansiklopedisi (Vol. 11, pp. 376–380). Türkiye Diyanet Vakfı.
10. Genç, M. (2000). İltizam. In İslam Ansiklopedisi (Vol. 22, pp. 154–158). Türkiye Diyanet Vakfı.
11. Genç, M. (2003). Malikane. In İslam Ansiklopedisi (Vol. 27, pp. 516–518). Türkiye Diyanet Vakfı.
12. Homer, S., & Sylla, R. E. (2005). A history of interest rates. John Wiley & Sons.
13. Miner, J. (2018). Genoa, Liguria, and the Regional Development of Medieval Public Debt. In R. Fredona & S. A. Reinert (Eds.), New Perspectives on the History of Political Economy (pp. 1–28). Springer.
14. Miner, J. (2020). Profit and Patrimony: Property, Markets, and Public Debt in Late Medieval Genoa. Business History Review, 94(1), 73–94.
15. Munro, J. (2001). The Origins of the Modern Financial Revolution: Responses to Impediments from Church and State in Western Europe, 1200–1600 (Working Paper No. 2). University of Toronto.
16. Munro, J. (2003). The medieval origins of the financial revolution: Usury, rentes, and negotiability. The International History Review, 25(3), 505–562.
17. Munro, J. (2007). The usury doctrine and urban public finances in Late-Medieval Flanders (1220-1550): Rentes, excise taxes, and income transfers from the poor to the rich. Washington Area Economic History Seminar at the University of Maryland Baltimore County.
18. Munro, J. (2013). Rentes and the European “Financial Revolution.” In G. Caprio (Ed.), Handbook of Key Global Financial Markets, Institutions, and Infrastructure (Vol. 1, pp. 235–249). Elsevier.
19. Musari, K. (2021). Esham, the Origin of Sukuk for Facing the Crisis: Historical Experience. Iqtishoduna: Jurnal Ekonomi Islam, 10(1), 45–58.
20. Pamuk, Ş. (2000). A monetary history of the Ottoman Empire. Cambridge University Press.
21. Pamuk, Ş. (2004). The evolution of financial institutions in the Ottoman Empire, 1600–1914. Financial History Review, 11(1), 7–32.
22. Pamuk, Ş. (2007). Osmanlı Devletinin İç Borçlanma Kurumlarının Evrimi, 1600-1850. In Osmanli Ekonomisi ve Kurumları (pp. 133–146). Türkiye İş Bankası Kültür Yayınları.
23. Tabakoğlu, A. (2016). İslam İktisadına Giriş. Dergah Yayınları.
24. Visser, W. A., & McIntosh, A. (1998). A short review of the historical critique of usury. Accounting, Business & Financial History, 8(2), 175–189. https://doi.org/10.1080/095852098330503