Islam’s Historical Contribution to Commerce and Finance


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The worst thing ethically and politically is to let [Eurocentric] separatism simply go on, without understanding the opposite of separatism, which is connectedness…. What I am interested in is how all these things work together. That seems to me to be the great task – to connect them all together – to understand wholes rather than bits of wholes…. In a wonderful phrase, Disraeli asks, ‘Arabs, what are they?” and answers: “they’re just Jews on horseback.’ So underlying this separation is also an amalgamation of some kind." Edward Said 2004.


Figure 2. The Bab al-Ghuri gate in Khan el-Khalili, a famous market in Cairo from the times of the Fatimids (Source)

Under the reign of Eurocentrism, the Western mind imagines that even if Islam came up with all manner of new ideas and technologies – ideas in engineering, art, mathematics and at a big push, science – even if this were all true we know that Islam is antithetical to capitalism. Wasting time praying 5 times a day makes disciplined capitalist activity a near-impossibility. And in any case, all this ‘irrational’ religious behaviour is the counterpoint to the cold hard rationality of capitalism. Indeed we know that Islam rejects usury and so the possibility of banking and making profits from capitalist activity is ruled out tout court.

Given all this, even if the Muslims came up with all manner of ideas in the aforementioned areas, Europe and the West could have gained nothing from Islam in terms of developing capitalism. So what have the Muslims ever done in terms of enabling capitalism in general as well as contributing to the development of early capitalism in Europe?  Obviously nothing, we are told in the West, which is precisely why in Western histories of the rise of capitalism it makes perfect and logical sense for us to focus solely on what went on in Europe as the Europeans pioneered capitalism and the institutions upon which it rests without any help from the non-Western world. Notable here is that our standard histories of the long rise of capitalism in Europe sometimes begin with the Italian commercial and financial revolution after about 1000; so it is to this that I shall now focus upon.

Islam and the first phase of ‘Afro-Eurasian regionalization’, c.650–1000

The notion that it was Venice that we should turn to rather than the Islamic Middle east and North Africa is problematic for at least four main reasons, all of which reveal that European commerce post-dated that of Islam and that without Islam there might never have been a Venetian trading hub at the centre of European commerce.

Figure 3. 15th century Ottoman maps of Venice (left) and the Mediteranean (right) (Source)

First, Islam had a high propensity for commercial trade and capitalistic activity. I can think of no better illustration of this than reminding ourselves that The Prophet Mohammed had been a commenda (qirād or mudaraba) trader. Moreover, in his twenties he married a rich Qurayshi woman (the Quraysh had grown rich from the caravan trade as well as banking). Interestingly 'the Meccans – the tribe of Quaraysh – caused their capital to fructify through trade and loans at interest in a way that Weber would call rational…. The merchants of the Muslim Empire conformed perfectly to Weber’s criteria for capitalist activity. They seized every and any opportunity for profit and calculated their outlays, their encashments and their profits in money terms' (Rodinson 1978: 14).

Second, many linkages between Islam and capitalism can be found in the Qu’rān. Thus the Qu’rān, ‘[d]oes not merely say that one must not forget one’s portion of the world, it also says that it is proper to combine the practice of religion and material life, carrying on trade even during pilgrimages and goes so far as to maintain commercial profit under the name of “God’s Bounty”’ (Rodinson 1978: 16–17).

Figure 4. 19th century depiction of a caravanserai, Richard Dadd (Source)

Islam prescribed that businessmen could more effectively conduct a pilgrimage than those who did only physical labour. Indeed the Qu’rān states that:

If thou profit by doing what is permitted, thy deed is a djihād…. And if thou invest it for thy family and kindred, this will be a Sadaqa [that is, a pious work of charity]; and truly, a dhiram [drachma, silver coin] lawfully gained from trade is worth more than ten dhirams gained in any other way (cited in Rodinson 1978: 29).

And The Prophet Mohammed’s saying that ‘Poverty is almost like an apostasy’, implies that the true servant of God should be affluent or at least economically independent. The booths of the money-changers in the great mosque of the camp-town Kufa illustrate the fact that there was no necessary conflict between business and religion in Islam. (Goitein 1968: 228–9).

It is also significant to note that the Qu’rān stipulates the importance of investment. And while many in the West associate the Sharīa (the Islamic sacred law) with despotism and economic backwardness, it was in fact created as a means to prevent the abuse of the rulers’ or caliphs’ power and moreover, it set out clear provisions for contract law. Not surprisingly there was a rational reason why the Islamic merchants were strong supporters of the Sharīa.

Figure 5. Umayyad Caliphate. Silver dirham of Hisham ibn Abdel Malik, Wasit mint (Iraq), dated  AH 123 (741 AD) (Source)

Third, the picture of a dense Islamic urban trading network counters the traditional Eurocentric vision of Islam as a desert populated by nomads. Towns sprang up throughout the Middle East and rapidly formed the major sinews of the Afro-Eurasian trading network. Maxime Rodinson reinforces the general claim being made here:

The density of commercial relations within the Muslim world constituted a sort of world market… of unprecedented dimensions. The development of exchange had made possible regional specialisation in industry and agriculture…. Not only did the Muslim world know a capitalistic sector, but this sector was apparently the most extensive and highly developed in history before the [modern period] (Rodinson 1978: 56).

Figure 6. 1787 Ottoman Turkish map of the Masjid al-Haram and related religious sites (Source)

This naturally flows into the fourth counterpoint to the Eurocentric dismissal of Islam: that ultimately Islam’s comparative advantage lay in its considerable ‘extensive’ power. That is, Islam was able to conquer horizontal space, realised most fully in its ability to spread and diffuse across large parts of the globe, of which the expansion of commercial capitalism was but a symptom.

The centre of Islam, Mecca, was not some kind of irrational pilgrimage terminus, but it was one of the centres of the Afro-Eurasian trading network. Islam’s power spread rapidly after the seventh century so that the Mediterranean became in effect a Muslim Lake, and ‘Western Europe’ a tiny promontory lying on the far western tip of a vast Afro-Asian economy. Islam spread not only westwards into Christendom – most especially into Spain (al-Andalus) between 711 and 1492 as well as Sicily in 902 – but also eastwards right across to India, Southeast Asia and China, as well as southwards into Africa particularly through commercial influence.

Its economic reach was so extraordinary that by the ninth century there was one long, continuous line of transcontinental trade pioneered by Islamic merchants, reaching from China to the Mediterranean.[2] The key point here is that between about 600 and 1492 what we witness is what I call Afro-Eurasian regionalization, which was subsequently upgraded into the world’s first global economy after 1492. And throughout this period, the Muslims were the principal architects of the Afro-Eurasian trans-continental economy.

The Middle Eastern Ummayads (661–750 ce), Abbasids (750–1258 ce) and North African Fatimids (909–1171 ce) were especially important, serving to unite various arteries of long-distance trade known in antiquity between the Indian Ocean and the Mediterranean. These included the Red Sea and Persian Gulf routes. The Abbasid capital, Baghdad, was linked to the Persian Gulf route, which in turn fanned out through the Indian Ocean and beyond into the South China Sea as well as the East China Sea. This route has been termed the Middle Route by Janet Abu-Lughod.

Figure 7. Medieval Muslim trade routes, Copyright © 1995-2005, Pearson Education, Inc. (Source)

Al-Ya’qūbi (c. 875), described Baghdad as the ‘water-front to the world’, while al-Mansūr proclaimed that ‘there is no obstacle to us and China; everything on the sea can come to us on it’. And there were numerous other Islamic ports that were important, especially Sīrāf on the Persian Gulf (on the coast of Iran south of Shīrāz), which was the major terminus for goods from China and Southeast Asia. The Red Sea route (guarded over by Egypt) was also of special importance.

Figure 8. Marco Polo wearing traditional Tartar attire (Source)

In addition to the sea routes, perhaps the most famous was the overland route to China, along which caravans passed through the Iranian cities of Tabriz, Hamadan and Nishapur to Bukhara and Samarkand in Transoxiana, and then on to either China or India. Marco Polo (the ‘Ibn Battūta of Europe’?) was particularly impressed by Tabriz:

The people of Tabriz live by trade and industry…. The city is so favorably situated that it is a market for merchandise from India and Baghdad, from Mosul and Hormuz, and from many other places; and many Latin merchants come here to buy the merchandise imported from foreign lands. It is also a market for precious stones, which are found here in great abundance. It is a city where good profits are made by travelling merchants (cited in Bloom and Blair 2001: 164).

The Muslims were particularly dependent on trade with many parts of Africa (not just North Africa). This was so for a number of reasons including first, that Egypt presided over one of the vital trade routes that linked the Far East and West (or the Southern Route in which Cairo was the terminus at the head of the Red Sea; and second, African markets constituted probably the most profitable branch of Islam’s foreign trade.

Islamic dhows carrying cargo plied the route down the East African coast as far south as Sufālah in Mozambique and Qanbalu (Madagascar). Gold was mined in various places including Ethiopia and Zimbabwe, while Kilwa (present day southern Tanzania) was the principal entrepôt. The most intense commercial relations experienced by the East African ports were with Aden, Suhār and Sīrāf. And this long-distance trade also helped stimulate trade into the African hinterland.

So it would be wrong to assume that West Africa was commercially isolated from the east coast and was ‘brought to life’ by the Europeans after 1492 (see Wolf 1982: 37–44). For it was the much earlier Islamic arrival at western entrepôts such as Sijilmassa (in Morocco) and Awdaghast that enabled the inter-linking of the eastern and western coasts both in the northern and sub-Saharan regions (Bovill 1933: chs. 5–6).

All in all, even before the turn of the second millennium, on the very eve of the ‘European commercial revolution’ the Muslims in particular had woven together vast swathes of Afro-Asia into an increasingly singular economic unit. And it was into this wider circuit of trade that Europe became, albeit indirectly, inserted into when it turned to commerce after about 1000.

Figure 9. A 1937 Yemeni stamp depicting a typical Dhow (Source)

Islam and Europe, c.1000–1517: Commerce, Finance and the transmission of Eastern resource portfolios via the Islamic ‘bridge of the world’

Eurocentric world history, as already noted, assumes that the rise of commerce was given its decisive thrust by the Europeans, most especially the Italians, after about 1000 ce. This date, of course, conventionally signifies the end of the Dark Ages. But the period after about 500 and especially after 650 could be called the period of the Eastern ‘Bright Dark Age’, especially the Middle Eastern Dark bright Age (Bala et al 2010). While Afro-Asian trade accelerated after about 1000 this owes its primary thrust to the growing interconnections between the Islamic Middle East and Africa in the west, as well as India, Southeast Asia and especially China in the east. The Middle East in effect constituted the Bridge of the World.

Figure 10. Traders en route via the Gulf of Akaba, 1839 (Source)

And as noted above, it was into this vast system of commerce that the Europeans inserted themselves. Thus before I describe this wider system, it is necessary to begin this discussion by considering how Europe in general and Italy in particular benefited from the growing Eastern trade in general and the role of Islamic West Asia in particular.

The East not only lay at the other end of the European long distance trading circuit but it also played a crucial role in the rise of European trade itself. For the fact is that European trade was ultimately made possible only by the flow of Eastern goods which entered Europe, mainly via Italy. Nevertheless, this is not to say that Italy was unimportant to the fortunes of European commerce, finance and production. For it was in fact pivotal, constituting the heart of European trade thereby pumping goods all round the ‘continent’ and feeding them into the many intra-regional trading systems (such as the Hanse and the French Champagne Fairs). But it was only able to play this central role because Italy was one of the major conduits through which Eastern ‘resources’ and trade entered and reshaped Europe. Indeed, the vast majority of this trade entered Italy courtesy of the North African Muslims in Egypt, who were supplied by the Southern trade route (based in the Red Sea).[3]

Figure 11. Caravan on the Silk Road (Source)

I now want to sketch the role of the Muslims in shaping Afro-Eurasian regionalization in the 1000–1492/1517 era. While the Middle Route became particularly important after the sixth century, it became extremely influential when Baghdad was the prime Muslim centre of trade after 750. But when Baghdad was plundered by the Mongols in 1258, the route underwent a temporary decline. However, with Iraq being subsequently ruled from Persia, the Gulf route revived. This Middle Route was also important because it enabled a ‘deeply symbiotic’ trading relationship between the Crusader kingdoms and the Muslim merchants who brought goods from as far away as the Orient.

The chief Crusader port in the Middle East – Acre – was controlled upto 1291 by the Venetians, and there they excluded their Pisan and Genoese rivals. Nevertheless, although the Venetians dominated the European trading system, they always entered the global system on terms dictated by the Middle Eastern Muslims and especially the North African Mulsims. Then with the Fall of Acre in 1291, the Venetians had no choice but to rely on the Southern route which was dominated by the Egyptians.

Figure 12. A map of Venice, c. 1000 AD (Source)

The Southern route linked the Alexandria-Cairo-Red Sea complex with the Arabian Sea and then the Indian Ocean and beyond. After the 13th century Egypt constituted the major gateway to the East. Importantly, ‘[w]hoever controlled the sea-route to Asia could set the terms of trade for a Europe now in retreat. From the thirteenth century and upto the sixteenth that power was Egypt’ (Abu-Lughod 1989: 149). Indeed between 1291–1517 about 80 per cent of all trade that passed to the East by sea was controlled by the Egyptians. But when Baghdad fell, Al-Qahirah – later Europeanised to Cairo – became the capital of the Islamic world and the pivotal centre of global trade (though this latter process had begun under the Fatimids in the tenth century).

Eurocentric scholars emphasise that European international trade with the East dried up after 1291 (with the Fall of Acre) as Egypt dominated the Red Sea trade to the East at the expense of the Christian Europeans. And it is this that supposedly prompted the Portuguese Vivaldi brothers to search for the more southerly route to the Indies via the Cape in 1291. But despite the proclamation of various papal prohibitions on trade with the ‘infidel’, the Venetians managed to circumvent the ban and secured new treaties with the Sultan in 1355 and 1361. And right down to 1517, Venice survived because Egypt played such an important role within the global economy.

Figure 13. Venetian traders and vessels (Source)

Moreover, Venice and Genoa were not the ‘pioneers’ of global trade but adaptors, inserting themselves into the interstices of the Afro-Asian-led global economy and entering the global economy very much on terms laid down by the Middle Eastern Muslims and especially the Egyptians.

In particular, European merchants were blocked from passing through Egypt. When they arrived in Alexandria they were met by customs officials, who stayed on board and supervised the unloading of the goods. Christians in particular required a special permit or visa and paid a higher tax than did their Muslim counterparts. The Europeans then retired to their own quarters which were governed by their own laws.

However, they were not allowed to leave their quarters in Alexandria and became wholly dependent upon the Egyptian merchants and government officials. Nevertheless, the Venetians and other Europeans accepted this regime because it was there whence they gained access to the many goods produced throughout the East. Indeed the fortunes of Venice were only made possible by its access to Eastern trade via North Africa.

Figure 14. Venetian traders and vessels (Source)

But in the end the most important function of Italy’s trading links with the Middle East and later Egypt lay in the fact that these commercial routes constituted important avenues along which many of the vital Eastern ‘resource portfolios’ diffused across to fertilise the backward West. And these resource portfolios enabled the various ‘Italian’ commercial, financial, and navigational revolutions for which they have become unjustifiably famous.

It is generally assumed that a whole series of financial institutions were pioneered by the Italians. The most important innovation we are told was the commenda (or collegantia), that the Italians allegedly invented around the eleventh century (e.g., North and Thomas 1973: 53). This was a contractual agreement in which an investor financed the trip of a merchant. Not only did it support international trade through the bringing together of capital and ‘trading labour’, but it had similar effects to a stock exchange in that it provided a market for savings which thereby fanned the flames of economic development.