Ottoman Cash Waqfs Revisited: The Case of Bursa (1555- 1823)
Professor Murat Cizakca*
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Table of contents
2. The Legal Background
2.1. Position of the Classical Jurists
2.2. Establishment of a Cash Waqf
2.3. The Perpetuity Debate
3. Cash Waqfs in Historical Reality
3.1. Survival of the Cash Waqfs
3.2. Icareteyn Vakiflari
3.3. The Management of the Cash Waqfs
4. Injection of Capital into the Economy
4.1. The Trustees as Borrowers
4.2. Capital Injection
4.3. The Decline of the Cash Waqfs
6.1. Primary Sources
6.2. Secondary Sources
Note of the editor
This article was summarised and updated from the author's extensive book A History of Philanthropic Foundations The Islamic World From The Seventh Century to the Present (Istanbul: Bogazici University Press, 2000). It is also a shortened and updated version of the author's original article published as Murat Cizakca, "Cash Waqfs of Bursa: 1555- 1823", Journal of the Economic and Social History of the Orient (E. J. Brill, Leiden), vol. 38, n° 3, 1995, pp. 313-354. A previous version of the article was published on www.MuslimHeritage.com in June 2004. The present version was converted to HTML with new illustrations.
* * *Cash endowments contributed to Ottoman society, without any cost to the State, by organizing and financing expenditures on education, health, welfare and a host of other activities. The aim of this article is to discover how these endowments functioned and contributed to the society over the long term. For this purpose the Cash Waqf Census Registers of the city of Bursa covering the period 1555-1823 were analysed. Thus, although limited to one Ottoman city, a long-term analysis covering almost three hundred years has been attempted for the first time.
The cash waqf (plural awqaf) was a Trust Fund established with money to support services to mankind in the name of God. The Ottoman courts approved these endowments as early as the beginning of the 15th century, and by the end of the 16th century they had reportedly become extremely popular all over Anatolia and the European provinces of the Empire.
Figure 1: General view of Bursa, Turkey. Color photochrome print created between 1890 and 1900. (Source).
The exact extent of the geographical diffusion of these waqfs and, specifically, in the Arab provinces is subject to discussion. The gifted capital of the waqf was "transferred" to borrowers who after a certain period, usually a year, returned to the waqf the principal, plus a certain "extra" amount, which was then spent for all sorts of pious and social purposes. These vague terms, "transferred" and "extra", have been used here deliberately. Whether the capital of the endowment was lent as credit to the borrowers and the return was in fact nothing but the ordinary interest constitutes another debate. In a society where health, education and welfare were entirely financed by gifts and endowments, the cash waqfs carried serious implications for the very survival of the Ottoman social fabric.
2. The Legal Background
2.1. Position of the Classical Jurists
The Ottomans, being devoted Hanefis, conducted their business and social affairs within the general guidelines established by this school of thought. It is, therefore, imperative that this analysis should start with a summary of the classical Hanefi position pertaining to cash waqfs. Let us first consider the thorny issue of the endowment of moveable assets. The essence of this problem pertains to the perpetuity of the endowment, the sine qua non condition for any waqf. Real estate was thought to be the best asset to ensure the perpetuity of an endowment. There were, however, three recognized exceptions to this general principle among the Hanefi scholars:
- the endowment of moveable assets belonging to an endowed real estate, such as oxen or sheep from a farm, was permitted;
- second, if there was a pertinent hadith, and
- third, if the endowment of the moveable asset was the customary practice, ta'amul, in a particular region.
Indeed, exercising judicial preference, istihsan, Imam Muhammad al-Shaybani had ruled that even in the absence of a pertinent hadith, the endowment of a moveable asset was permissible if this was customary practice in a particular location. Apparently, even custom was not always a required condition, for according to al-Sarakhsi, Imam Muhammed had, in practice, approved the endowment of a moveable asset even in the absence of custom. Furthermore, both Imams Muhammed al-Shaybani and Abu Yusuf had confirmed, absolutely, the endowment of a moveable asset attached to a piece of real estate. In view of this, it is not surprising that we often see such combined cash/real estate waqfs in the Ottoman records.
Figure 2: Endowment charter (waqfiyya) of Haseki Hürrem Sultan Mosque and Madrasa in Jerusalem. The document is dated 964 H / 1556–7, it is held in the Museum of Turkish and Islamic Arts, Inventory Number 2192, p. 1b. (Source).
Given the acceptability of moveable assets as the basis for creating a waqf, how does one define a moveable asset? More specifically, can money be considered a moveable asset and, therefore, be permitted as the basis for the establishment of a waqf? Imam Zufer answered this question affirmatively and ruled that the endowment of cash was absolutely permissible. Zufer went into detail as to how such an endowment could be organized: he suggested that the endowed cash should form the capital base of a mudaraba partnership and any profit realized be spent in accordance with the general purpose of the waqf as stated in its charter. If the moveable assets endowed were not originally in a liquid cash form, then they should be sold in the marketplace and the cash thus obtained could be utilized as the capital of a mudaraba.
In summary, three principles constituted the basis upon which the later Ottoman jurists built the structure of the cash waqfs: the approval of a moveable asset as the basis of a waqf, acceptance of cash as a moveable asset and, therefore, approval of cash endowments.
2.2. Establishment of a Cash Waqf
An additional debate in the establishment of Ottoman cash waqfs revolved around the question of irrevocability. According to Ebu Hanife, the founder of a waqf or his descendants could revoke the original decision and claim the endowed property back. That is to say, a waqf was revocable. Ebu Hanife added, that for a waqf to become irrevocable and valid, a court's decision was necessary.
Other great jurists of the Hanefi School did not agree with this opinion. Ebu Yusuf, for instance, argued that when Prophet Muhammad endowed his property, his personal property rights became null and void. Moreover, neither the Prophet nor any of the four Caliphs or the followers of the Prophet, ashab, ever reversed their decision to endow their properties. These scholars further argued that the establishment of a waqf was an irrevocable act, based upon the hadith pertaining to 'Umar's endowment.
Figure 3: First pages of the Suleymaniye Kulliye (Complex) of Suleyman I deed (waqfiyya) written in 965/1557. Source: Vakiflar Genel Mudurlugu Arsiv ve Nesriyat Mudurlugu Arsivi, N° 52.
During the Ottoman period, a legal precedent was established which resolved the debate among the great Hanefi scholars, a man wishing to establish a waqf informed the court of his intention thereby creating the waqf. He later revoked his decision and demanded the trustee of the waqf return his capital. When the latter refused to do so, the case was brought before the court where the request was flatly rejected by the judge who declared that a waqf, once established, was irrevocable and definite.
There are many instances of the establishment of cash waqfs noted in the Bursa Court Registers. One particular case dated 1676 should suffice to demonstrate the process described above. A certain Mehmed Ali b. Hasan, resident of the Karaca Muhiddin district of Bursa, had appointed Hasan Celebi b. Mehmed as trustee of a cash waqf which was to be established with a rather modest capital of 50 Esedî Grus. This capital was to be loaned to borrowers having satisfactory collateral and sureties on a "ten to eleven percent per annum" basis.
The return from this investment was to be used to provide a public banquet for the poor Muslims in the "zaviye" of the Baglar district on the evening of every 12th Rebiullevvel. The 50 Esedi Grus was then entrusted to the trustee. Later the endowment's founder demanded the return of his capital on the belief that the three imams did not consider the establishment of a waqf with cash a legal act. The trustee responded that according to Imam-i Ensari quoting Imam-i Zufer, the cash waqf was legal. The two disputants appealed to the court for an opinion. In his application to the court, Mehmed Ali b. Hasan stated that since Abu Hanife did not consider a waqf irrevocable and, therefore, withdrawal from a decision to establish a waqf was permitted, he wished to do so and demanded his capital from the trustee of the waqf. The trustee responded by confirming that, indeed, Abu Hanife had not considered a waqf as definitely irrevocable but Abu Yusuf, the "second imam" and Al- Shaybani, the "third imam" had ruled that a waqf was both definite and irrevocable and therefore he requested the decision of the court upholding the irrevocability of the waqf. The judge ruled that the waqf was definite and irrevocable and that any attempt to abolish the waqf was null and void. Moreover, the judge ruled, this decision was in agreement with the rulings of all the "strong imams". This verdict finalized the procedure for the binding establishment of a cash waqf.
2.3. The Perpetuity Debate
Figure 4: External view of Topkapi Palace Library, established by the Sultan Ahmed III as his own waqf.
The establishment of cash waqfs by the Ottomans during the 15th century appears to have taken place without legal difficulties. But during the next century when these waqfs became so popular that they dominated the awqaf system, the military judge of the European provinces, Civizade, challenged the situation. The Seyhulislam Abussuud Efendi almost immediately countered his view and a fierce debate began. Since the details of this debate have already been published they will not be summarized here. It suffices to say that the debate between these two great jurists and their followers lasted for more than a century and even then remained inconclusive. Supported by the State, cash waqfs continued to exist and flourish. We will now focus our attention on the paradigm of perpetuity, the most vital issue in the debate, and seek answers to the following questions:
- Since, one of the main points of the debate concerned the problem of perpetuity (proponents arguing that these endowments had as good a chance for survival as any other real estate endowments and the opponents believing that they would collapse within a relatively short time), would it be possible now, during the first decade of the 21th century, to evaluate retroactively which side of the debate was more true?
- What factors caused their failure or support endowments, indeed, had rapidly disappeared, where they so badly managed? If, in contrast, they succeeded in surviving for any length of time, then what were the reasons for their relative success?
- In what way did the cash waqfs contribute to the process of capital accumulation? This question has to be approached from two perspectives, i.e., from the point of view of savers as well as users of funds. More specifically, did the savers pool their resources to form joint cash waqfs or did they add their capital to already existing ones? Did the users of capital have access to several cash waqfs so as to enlarge the available pool of capital at their disposal?
- In the process of transferring funds to entrepreneurs or to the public, to what extent was the Islamic prohibition of riba observed? In other words are the claims that cash waqfs violated Islamic law justified?
Figure 5: Original Ottoman coin (left) and gold-coloured (brass) replica (right), both used as ornaments, dated 1223. (Source).
3. Cash Waqfs in Historical Reality
3.1. Survival of the Cash Waqfs
Since perpetuity is considered to be the conditio sine qua non of any waqf, an analysis of the survival rate of the cash waqfs assumes great importance. Unfortunately, with the exception of the Barkan-Ayverdi study, there is no published source that is relevant for this paradigm. Even this well-known study suffers from two weaknesses. First, it covers a time span of merely 76 years and is therefore unsuitable for an analysis of perpetuity. Next, closely related to the first weakness (since it is based upon an analysis of only three tahrir registers), the fluctuations in the number of waqfs that survived may be misleading. These fluctuations may have resulted from the fact that there may have been more than one tahrir register for a single year and a waqf not observed in one register may simply have been included in the missing register.
Bearing in mind these shortcomings of the Barkan-Ayverdi study, which concentrated on Istanbul waqfs, an attempt has been made in this article to overcome these two weaknesses by a study of the Bursa cash waqfs. To start with, the time span has been expanded to cover the period 1555-1823, i.e. a period of 268 years. Secondly, the analysis has been based upon the individual cash waqf. Thus, it has been possible to trace the performance of a waqf over a much longer period of time and it has been found that a waqf that seemed to have vanished at a certain point in time could be "re-discovered" at a later period.
The main source used for this study is the set of registers that may be called aptly the "vakif tahrir defterleri" or the cash waqf censuses. About seventy volumes of these registers have been identified among the Bursa Court Registers Collection. In order to facilitate the research, a sample had to be made and those registers with approximately 20 years in between were chosen. Having selected our sample sources, we were then in a position to examine thoroughly the debate between the two great jurists of the 16th century, Chivizade and Seyhulislam Abussuud Efendi and attempt to conclude, some four hundred years later, whose perspective was the most accurate. The question that we researched was, "what percentage of registered waqfs were perpetual"? But first, the term "perpetual" must be defined. For all practical purposes, a perpetual waqf is defined here as one which survived for more than a century. Thus, those waqfs that had survived for at least one hundred years were sought.
Figure 6: An Ottoman akça coin dated 1115 hijra (1703 AD), issued during the reign of Sultan Mehmed IV.
In order to find the answer to the problem of perpetuity, a total of 2688 cash waqfs were entered into the computer. This constituted the total population of the research. Within this whole population, however, there were 761 individual waqfs that were repeatedly identified across several different years, hence the much larger total population figure. The main question can thus be re-stated: what percentage of these 761 waqfs were "perpetual"?
In order to answer this question, the entire waqf population was analysed by computer. To help the computer identify distinct individual waqfs, it was decided that the district (mahalle) would be the main research unit. There were usually several waqfs in each mahalle and each of the latter was given a separate code. The computer was ordered to arrange first the entire population according to the mahalles in alphabetical order; and, secondly, to produce a chronological list of the waqfs in each mahalle. With this chronological list of district waqfs in hand, it was then a simple matter to search for an individual waqf and count the number of its occurrences across different registers and different years.
One of the greatest difficulties encountered in this study was the naming of the mahalles. This difficulty became quite serious since the recording clerks often omitted writing the name of the mahalle in which a waqf was established, and so many waqfs could not be included in the research. Thus, the number of perpetual waqfs observed represents a probable minimum of the total reality. This number was 148, that is to say out of 761 individual waqfs, 148 definitely survived for more than a century. This gives us a "perpetuity percentage" of 19%. It is quite clear that had it been possible to incorporate, into the general population, those waqfs that could not be traced to a specific mahalle, this percentage would have exceeded 20%.
Figure 7: Front cover of Inventory of Ottoman Turkish Documents about Waqf Preserved in the Oriental Department at the St. Cyril and Methodius National Library by Evgeni Radushev, Svetlana Ivanova, Rumen Kovachev, Part 1: Registers, Sofia, IMIR, 2003. Click here for the table of contents and here for the preface to the book written by Vera Mutafchieva.
Given this information, can we then pass a judgement about the 16th century debate of perpetuity? In other words, was Abussuud Efendi correct in arguing that cash waqfs had as good a chance as real estate waqfs for long-term survival? Obviously, what has been presented above constitutes only the first part of the answer to this question, i.e. that at least 20% of the cash waqfs survived for more than a century. For a complete answer, it would be necessary to determine the survival rate for real estate waqfs. Such research has never been attempted.
At this point, it may be argued that the real estate waqfs, normally, would have had a far better chance of survival than the cash waqfs and Abussuud Efendi must have been wrong to argue that the latter had as good a chance for survival as the former. But the staying power of the real estate waqfs should not be exaggerated. After all, waqfs were subject to such dangers as frequent fires, earthquakes and the declining fertility of land. Moreover, they suffered from inelastic revenues, the artisans who rented their shops refused to increase their rents and were difficult to evict due to the State support they enjoyed.
3.2. Icareteyn Vakiflari
When a major disaster struck a waqf property, substantial reconstruction work would have to be undertaken. Financing such unforeseen major expenses would naturally have been beyond the capacity of the normal revenues of the endowment. The solution was found in an institution known as the icareteyn vakiflari, which may be translated as the "double rent endowments."
The basis of this institution is subject to debate. Gerber has argued that the classical law manuals are silent about the icareteyn vakiflari and that these endowments were invented during the 16th century. According to Gerber, these endowments were incorporated into the Ottoman jurisprudence in the year 1611-12, with the promulgation of a new law. This law belonged to the orbit of the state law, kanun, and was not an original Islamic concept. However, this view is challenged by Akgunduz who traces the origin to the so-called icare-i tavile by which the long term renting of an endowment property became possible for the first time as early as the 10th century. The icare-i tavile, a simple method by which the trustee signed successive rent contracts in a single session, was approved by the well known Hanefite jurists Mohammed b. El-Fadl and Ca'fer al-Hindawani. Moreover, the concept of a lump sum payment can also be observed in the writings of these early 10th century jurists. That the icare-i tavile evolved during the next six centuries into the Ottoman icareteyn vakiflari is certainly an interesting idea and is supported by Klaus Kreiser. Drawing our attention to a 15th century fetwa (religious decree) by Seyhulislam Molla Gurani and to Bulent Koprulu's work, Kreiser has informed us that the concept of double rents was well known during the 15th and 16th centuries.
But this evolution did not occur smoothly and the legality of the concept was subject to an intense debate lasting several centuries even before the Ottomans emerged as a world power. The final outcome of the debate was that such endowments could be permitted only following the decision of a judge and in response to a dire necessity, zaruret. In any case, the promulgation of the 1611-12 law was apparently in response to such a zaruret which took the form of a series of fires that caused large scale destruction of the waqf property in Istanbul.
The new system was based upon two different types of rents: the first one was a large lump sum amount, muaccele, paid promptly to the trustee of the waqf. The second type, mueccele, was the normal annual rent. According to a fetwa by Abulhay, the muaccele had to be roughly equal to the real value of the waqf property and the relationship between the two rents exhibited a ratio that varied between 1:30 and 1:112.
With the now substantially enhanced revenues of the waqf, the reconstruction work could be completed. In order to ensure that the rental of a waqf property remained attractive to prospective tenants, the tenure was lengthened substantially, up to as much as 90 years.
Lengthening the tenure to nearly a century created two new problems. The first one was the legal problem of circumventing the orthodox legal prohibition on the long-term lease of a waqf. A legal device, hile-i ser'iye, which has been explained in detail by Gerber, solved this problem. The second problem was the more substantial one of confusion and eventual loss of the waqf property rights in the long term. It goes without saying that with the tenure increasing to just under a century, the waqf property ended up having, in practice, two "owners" which must have led to substantial confusion of property rights. As a result, the new tenants who rented it as icareteyn must have eventually usurped some real estate waqf property. There is substantial evidence that in Egypt, where the ninety years tenure was applied, probably for the first time, this practice led to the emergence of pseudo private property.
Although it is not possible, within the present limitations of our knowledge, to quantify these arguments, substantial evidence can be found regarding the evolution of the Ottoman waqf law. Consider, for instance, the legal status of the person, mutasarrif, who utilized the waqf property. Although, strictly speaking, when the former died, the contract between him and the endowment should have been cancelled, however, over time a transfer prior to death was permitted. This transfer took the form of renting or selling the waqf property to a third party. Bequeathing the property to one's children or even to other relatives was permitted first in 1833 and then in 1867. When such transfers became legal, clearly the status of anicareteyn waqf effectively approached that of private property. Finally, Vakiflar Kanunu, the republican law of endowments, permitted the private ownership of a waqf property against the payment of a so-called taviz bedeli.
Until now, we have referred to the "usurpation" of waqf property rights by private individuals. But the greatest challenge to these rights came from the State and need not be repeated here as it has been explained in detail elsewhere. All of the above should indicate the vulnerability of the real estate waqfs for long term survival and hence, in retrospect, support Abussuud Efendi's argument in the perpetuity debate. Before moving on to the next topic, it will be argued here that the icareteyn vakiflari probably constituted the origin of the well-known malikane system, which was initiated in the year 1695 and thereafter dominated Ottoman State finance during the 18th century. In the malikane system, as in the icareteyn vakiflari, tax-farms were auctioned off to the highest bidder who paid a muaccele, a large lump sum payment and an annual rent, mal. The system was introduced during a period of extreme financial hardship and severe budget deficits caused by the long and costly war with the Habsburgs. It played a crucial role in restoring the State finances (Genç, 1975).
3.3. The Management of the Cash Waqfs
Having observed the "perpetuity percentage" of the cash waqfs, the obvious question to ask at this point is one of management. How was it that some twenty percent of the cash waqfs succeeded in surviving for more than a century in the first place? To answer this question we need to take a careful look at the way these waqfs were managed. More specifically, we will be concerned here mainly with the manner in which the trustee invested the capital of the waqf.
A typical 18th century waqf register contains the following information:
1. The name of the waqf and the purpose for which it was established;
2. The name of the mahalle; district, in which the endowment was registered;
3. The name of the trustee;
4. The time period covered by the census;
5. Original capital of the waqf;
6. Later additions to the capital of the waqf, either by individuals or by other waqfs;
7. The balance of the new capital thus formed;
8. The return obtained from the investment of the endowed capital at the end of the year;
9. The purpose for which the annual return was designated, i,e., the expenditure or almasarif. Finally, in the section known as the zimem, information about the borrowers of the endowment capital was given;
10. The names of the borrowers;
11. The amount of capital they borrowed;
12. The mahalle where the borrowers lived;
13. The religious denomination of the borrowers; and
14. Their gender.
The invaluable wealth of information contained in the waqf census registers stems from the standardized entry of data kept on hundreds of endowments across a time span of nearly three hundred years. Leaving aside the usual changes in the palaeography, there are only two distinctions discernible between a record kept in the 16th century and one of the 18th century. Pprofit was called iradin the former period and murabahain the latter; and whereas in the earlier period there is no information supplied about the borrowers, this information is made available in the latter. With the exception of these differences, a 16th century waqf census entry contains exactly the same type of information as the one from the 18th century.
A typical 18th century cash waqf entry would read like this: "The account of the revenue and expenditure of the Muslim endowments for the purpose of (assisting) the avariz and nuzul taxes for the (residents of the) Orhan Gazi district of the city of Bursa during the trusteeship of Esseyid Halil Aga, the trustee of the said endowment from the year 1200 (1785) until the end of Zilhicce of the same year."
This particular cash waqf was endowed with an initial capital of 2377.5 grus. To this, the "profit" of the previous year was added which increased the capital to 2544 grus. Later, we have three other waqfs further contributing to this 2544 grus. The first contribution, 50 grus, was provided by the waqf of the Ayse Hatun for the purpose of reciting the mevlid. The second one, 85 grus, came from the waqf of Hatim Hatun, for the same purpose. Finally, the third contribution, 50 grus, also came from the waqf of Hatim Hatun this time, for the purpose of buying candles for the Orhan Gazi waqf. The total capital of the endowment thus, increased from the original 2377.5 grus to 2729 grus, a total addition of 351.5 grus.
This enhanced capital of 2729 grus was then distributed as credit to 20 individuals. These investments generated a return of 257.5 grus, murabaha fi sene-i kamile, which represented 9.4 per cent of the invested capital. Out of this return of 257.5 grus, a total of 86.5 grus were spent to assist the payment of avariz and nuzul taxes, to recite the mevlid, to buy candles, to pay the trustee and the bookkeeper, and for miscellaneous expenses. The remaining 171 grus was called the ziyade ez masraf and was added the following year to the capital of the endowment. This demonstrates, in brief, how a cash waqf actually functioned.
In a nutshell, the endowed capital was distributed as credit to a number of borrowers and the return from this investment was spent for religious and social purposes. If the return exceeded, as in this particular example, the expenses, the remainder was then added to the original capital of the endowment the following year. In this brief explanation there are many points that cry out for an explanation. First, let us consider the enhancement of the initial capital.
The original capital of an endowment could be expanded in two ways: either the return of the invested capital exceeded the expenditure and the resulting profit was added to the capital, or other endowments assigned part of their revenue to the endowment considered. The waqf for the provision of food to the members of the guild of sipahiyan constitutes a good example: the original capital of this endowment was 2010.5 grus. Four other endowments contributed to the capital of this waqf increasing it to 2180.5 grus. There is no satisfactory explanation for this frequently observed phenomenon of the transfer of funds between endowments. Whatever the explanation, the increased capital was invested in its entirety through transference to borrowers.
Having observed above that the original capital of the endowment could be increased either by a reinvestment of the profit generated or by contributions from other endowments, it will be argued here that there must have been a relationship between "perpetuity" and enhancement of the initial capital. Put differently, we have the impression that the "perpetual waqfs" owed their survival to the enhancement of their initial capital. It has been stated above that 148 perpetual waqfs were studied. Of this total a 25% sample (36 perpetual waqfs) was created and the relationship between the enhancement of their capital and their perpetuity was examined. The results of this analysis are presented in Table 1 . Out of these 36 perpetual waqfs, only 7 or 19%, had not had their initial capital expanded. The remainder, i.e., 81% of these waqfs, had gone through a process of capital enhancement. Thus, our impression that the enhancement of the initial capital appears to have been an important factor in explaining the perpetuity of the endowments was confirmed.
Let us now examine the nature of the return of the invested capital, the irad or murabaha. Was it based on a certain percentage of the capital invested, i.e. a rate of interest pure and simple, or was it solely the profit generated by the invested capital? If the former is true, it goes without saying that this would be in contradiction with the well known Islamic prohibition of interest. In such a case an explanation concerning how the prohibition was circumvented would be necessary. If the latter alternative is correct, i.e. return equals profit realized, then the return could conceivably entail not only a situation of profit but also a loss thereby causing a potential depletion of the initial capital as well.
A cash waqf could invest its capital in one of these three methods: mudaraba, bida'a and muamele-iseriyye. The first two methods are well known forms of Islamic finance and need not be explained here. The third expression, on the other hand, is a general terminology covering various methods by which money could be lent to borrowers within the framework of Islamic jurisprudence. While the jurists permitted these muamele-i seriye methods, it seems they were simple legal devices intent on obeying the letter of the law while violating its spirit. Of these, a method called Istiglal, was the most wide-spread. By this method, the borrower was asked to provide a collateral, usually his own house, which he was permitted to continue using but for which he had to pay a rent for as long as he kept the waqf's money in his possession. When he paid back the credit, the ownership of his house reverted back to him. It is the exact nature of this rent and whether it actually constituted interest that is debated.
Thus, through istighlal and other similar measures, it was possible for cash waqfs to lend money (on interest) and still remain within the law. But did they actually lend money on interest or pseudo interest? We searched for the answer to this question by examining the murabaha/capital ratios. This search also shed light upon a recent debate between modern economic historians and jurists. This debate started with the Barkan-Ayverdi study that claimed that the cash waqfs simply lent money on interest. These authors were then joined by first Mandaville and then Gerber.
A large body of modern day jurists specializing in Islamic law came to notice Barkan's and others' argument when these views were summarized and published in Turkish (Çizakça and Çiller, 1989). In a symposium that followed in Istanbul, the historians' views were criticized on the grounds that all of the methods by which the cash waqfs transferred their capital to the borrowers had been scrutinized carefully by the Ottoman jurists and were therefore legal. More specifically, it was argued that the historians had been confused by some of the terminology used in the endowment deeds. The term istirbah, for instance, which some historians wrongly interpreted as resorting to riba or interest, simply meant that the capital of the endowment was not transferred as karz-i hasene, lending without interest, but that a share of the profit to be earned by the investment of the endowed capital was to be paid back by the borrower to the waqf. The term ilzam-i ribh, likewise, meant that the borrower was required to make a profit and return to the waqf the principal plus a share of this profit. The term, onu onbir uzere, which can be translated as "eleven out of ten", specified this profit share and meant that for every ten dirhems earned by the borrower or the entrepreneur, one dirhem should be returned to the waqf.
The crucial word here is "earn". Indeed, if as Donduren suggests, the amount returned to the waqf by the borrower was a percentage of the profit earned, then this would be a profit share and not interest. So, herein is the basis for yet another debate.
To test this theory we need to investigate the profit/capital ratios for each cash endowment. If Donduren is right and the return of the capital was in the form of a profit share, then we would expect that the profit/capital ratio would exhibit a fluctuating trend reflecting the ever changing amounts of profits (or losses) accruing to the invested capital. If the return, however, were in the nature of in would expect to see more or less constant profit/capital invested.
Before we start this analysis, however, we need to make a distinction between judicial and economic interest. Even if the profit/capital ratios exhibit a constant trend and the return is therefore identified as interest, it must be remembered that this pertains to an economic interest and not to a judicial one. This is because, as far as judicial interest is concerned, the issue had been resolved centuries ago by the jurists. Istighlal and other methods of lending that modern historians consider simply as interest, pertain in actual fact to economic interest. As far as the Legal Establishment was concerned, these instruments were permitted and not categorized as interest. Most of the Ottoman jurists had no doubts about the legality of these instruments.
To find an answer to the question of whether the murabaha or irad constituted an economic interest, 1563 waqfs and their respective profit/capital ratios covering the period 1667-1805 had been entered into the computer. This evaluation constituted a major part of an earlier study (Çizakça, 1993). Only four of these waqfs exhibited significant fluctuations while all the rest, i,e., 1559 of them, produced returns of between 9 and 12 per cent. Thus we conclude, although the financial instruments utilized by the cash waqfs were considered to be legal and approved by the courts, these constant ratios strongly suggest that an economic interest prevailed. The details are presented below.
Average profit/capital ratio (Economic interest)
Economic Interest Rates in Bursa
At this point, it would be appropriate to ponder the implications of this observation. First of all, the increasing trend of the economic interest rate in Bursa is diametrically opposed to the declining trend of the rate of interest observed in the West. This observation needs urgent explanation and should constitute the subject of a separate research. Moreover, there seems to have existed a secondary capital market in the Ottoman economy. This conclusion is suggested by the observation that market interest rates prevailing among the sarraf in Istanbul as well as in Ankara were significantly higher than the Bursa interest rates. This leads us to the following conclusions: first, the cash waqfs were prohibited from applying the existing market interest rate and were not allowed to charge rates above a certain limit imposed by their founders. Second, there were at least two different rates of interest prevailing in the market with the cash waqfs applying the lower rate. Consequently, it would make economic sense to borrow from a Bursa cash waqf and to lend the capital borrowed at the market rate of interest, say, to the sarrafs, bankers, in Istanbul.
We will investigate this speculation below. For the moment, it should suffice to point out that evidence from other sources support this argument. Consider, for instance, the forthcoming book by Ronald Jennings where he has shown that the trustee of a waqf in Lefkose, Cyprus lent money to the poor at 20 or 30% "interest" thereby violating the condition of the donor that only 10% "interest" be charged. This violation did not escape the attention of the court and the trustee was accused of fraud.
It is possible to find literally thousands of endowment documents, vakifnames, which impose a maximum level of economic interest to be charged. Consider the following cases: In the month of Safer, 1513, el-Hac Suleyman b. el-Hac (?) endowed 70.000 silver dirhems. Of this, 30.000 dirhems were to be spent for the construction of a school and the remaining 40.000 was to be loaned as muamele-is-eriyyeand istiglal with 10% annual murabaha. The revenue thus obtained was to be spent as follows: 3 dirhems daily wage to the teacher of the school, 1 dirhem to his assistant, 1 dirhem to the person who recites the Koran, and 2 dirhems to the trustee of the endowment.
Looking at the situation from a purely economic point of view, it may be suggested that if other institutions like the sarraf existed, that fully exploited the high market demand for capital by charging higher rates of interest, then eventually such institutions would expand at the expense of the cash waqfs, which due to moral and religious considerations were not permitted to charge beyond a maximum rate. We will have more to say on this argument when we consider the decline of the cash waqfs.
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by: Professor Murat Cizakca, Sun 27 June, 2004