Ottoman Cash Waqfs Revisited: The Case of Bursa (1555- 1823) - Cont'd
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4.1. The Trustees as Borrowers
The points just made may be investigated further by a careful analysis of the borrowers. It has been indicated above that after the year 1749; the Bursa waqf tahrir registers contain a section for each waqf that informs us about the persons who borrowed the capital of the endowment. Looking carefully into these sections it should be possible to identify frequent borrowers, or those who borrowed regularly from a multitude of endowments. These individuals were most likely the ones who borrowed at the lower rate offered by the cash waqfs of Bursa and then lent this cash at higher rates to the sarrafs of Istanbul. The careers of two trustees extending from 1749 to 1785 in the district of Timurtas in Bursa illustrate this point.
Figure 8: An Ottoman akça coin issued during the reign of Sultan Mustafa b. Mehmed (1617-18 ; 1622- 29).
First of all, we note that these persons had administered as many as eight different endowments. Thus, it seems, the trusteeship had by this time emerged as a distinct profession. Halil Efendi received 69 grus and 360 akces salary, mevacib, annually from these establishments in the year 1749. Eighteen years later, in 1767, he was still managing seven foundations in the same district and his annual salary had increased to 76 grus and 260 akces. But he was not satisfied by this and had begun borrowing from the very foundations that he administered. The total amount he borrowed in 1767 amounted to 14 grus and was obtained from two different foundations.
In the year 1785, a certain Ahmet Efendi replaced Halil Efendi mentioned above. This Ahmet Efendi served as the trustee of six cash waqfs in the same Timurtas district. Four of these six endowments were the same as those managed previously by Halil Efendi. Ahmet Efendi earned a salary of 50.5 grus from these endowments, considerably less than Halil Efendi's 76 grus, 360 akces. But Ahmet Efendi was a much greater borrower. He borrowed a total of 79 grus, far in excess of Halil Efendi's 14 grus, from four of the endowments he was managing.
These two cases lead us to believe that not only had trusteeship emerged as a distinct profession, but also that trustees were emerging as major borrowers as the 18thcentury progressed. This increasing tendency for trustees to borrow is also confirmed by a more thorough analysis involving a 25% sample for the years 1749-1823. The details are presented below.
Based upon the tables, we can now conclude that the trustees were becoming more and more significant as borrowers. Since they controlled the cash waqfs it must have been relatively easy for them to borrow capital from these institutions. The percentage rate at which they borrowed was shown to have been substantially lower than the prevailing market rate. Consequently, it is argued that the trustees must have earned substantial amounts by exploiting the difference between the two rates of "interest" existing in the capital market.
4.2. Capital Injection
All the information presented above supports the fact that cash waqfs were responsible for a large-scale injection of capital into the economy of Bursa. Based on results of an analysis made with a 25% random sample, it seems, in a given year, 10 to 12 persons, on average, borrowed from a single waqf. But some waqfs provided credit to as many as 37 to 42 persons within a given year.
If we take 1767 as the year for which we have the most complete information, and multiply 1662, the figure derived from the 25% sample as the number of borrowers for that year, by four, we obtain a very rough estimation of the total number of borrowers; This figure is 6648. Thus, we conclude that in a given year during the 18th century more than six thousand persons were provided with credit by the cash waqf system in the city of Bursa.
To gain a figure for the total amount borrowed by these people, we should also multiply the credit provided in the sample for 1767, 117.084, by four. This gives us almost half a million grus. At this point we may wonder about the relative significance of this figure. Comparing this figure with the data provided by Mehmet Genc for the tax yield of the Bursa silk cloth press, mukataa-i resm-i mengene-i kutni ve pesimi ve keremsud-i Brusa ve tevabii, for the years 1757-1788, we note that the capital injected into the economy of Bursa by the cash waqfs was nearly ten times greater than the amount withdrawn by the State through the tax farm of silk cloth press. The redistribution function of the cash waqfs must not escape us here: the cash injected into the economy was not a lump sum amount given as credit to a select group. On the contrary, this amount saved by the privileged few was voluntarily redistributed. Thus, injection and redistribution occurred simultaneously. Evidence for this will be provided below.
In this context, an assessment of the six thousand or more persons who were provided with credit needs to be made. Indeed, what does this figure imply? Unfortunately, a reliable estimation of Bursa's population for the 18th century is not available. Erder, based upon the reports of French travellers, has made the only estimate that this author is aware of. Accordingly, in the early 18th century, Bursa had a population of about 50.000 to 65.000. By 1831, Behar (1996: 35) informs us that the city's population was 60.000. By the beginning of the next century (1911), this figure had reached 76.000. Thus, it would be reasonable to argue that for most of the 18th century Bursa probably had a population of about 60.000 . In view of these numbers, we can conclude that about 10% of the total population of Bursa resorted to the cash waqfs of the city as a source of credit.
At this point, however, we must point out another difficulty in analysis and that is the repetitiveness of the data. We do not know if these six thousand or so borrowers were six thousand separate individuals or if a particular group of people borrowed from a multitude of endowments in a given year. The answer to this question is important also from another perspective: capital pooling.
In view of the difficulty presented by the Muslim names, in searching for an answer to this problem, it was necessary to develop a method that would reveal specific information about each one of the more than six thousand borrowers. This study was facilitated by the availability of two additional types of information: the name of the district, mahalle, in which the borrower resided and his profession. To facilitate the research further, a sample, had to be taken. This time four of the most popular Turkish names were chosen: Ahmet, Mehmet, Ali and Mustafa. The computer was then asked to list all the Ahmets, together with the names of the endowments from which they borrowed, the name of the district in which each one lived, the profession of each one and the amount borrowed by each. The same process was repeated for each of the other names. As a result, 133 professions were identified. Leaving aside one interesting case whereby a mother and a son had borrowed from the same endowment, it became clear that only one individual, a certain Ali Molla, had borrowed from two different endowments in the year 1767. This gives us a ratio of 7.5 per thousand. Thus, within the obvious constraints of our sample, it is concluded that only 7.5 per thousand of the borrowers practiced capital pooling. This gives, as a very rough estimate, the result that out of the 6648 borrowers only about fifty were involved in capital pooling. In view of what has been explained above about the increasing importance of the trustees as borrowers, it can be argued that most of these fifty borrowers plausibly belonged to this particular profession. This argument is supported by a previous study that showed that another profession that would have been most likely to utilize the cash waqf sources, i.e., the silk sector, rarely did so. In fact, the ratio Silk Credits/Total Credits never exceeded 3% during the period 1749-1785 (Çizakça, 1993).
4.3. The Decline of the Cash Waqfs
Figure 9: Front cover of Türk Vakiflari edited by Zekâi Baloglu (Tüsev Yayinlari, Istanbul, 1996).
In the year 1909, cash waqfs yielded 7500 grus interest in Istanbul and 9400 grus in the provinces, thus a total of 16900 grus, while the total revenue of the awqaf ministry amounted to 56.966.000 grus. By contrast, in the same year the Ziraat Bankasi, an agricultural bank, singularly advanced about ten times this amount, 563 million grus, as credit. The credit advanced by the Ottoman Bank, on the other hand, reached a staggering 1,102 million grus. Seyhun does not make it clear if the entire capital of the cash waqf system was included in the total revenue indicated above but it would seem that it was not. He informs us that in the year 1914 a new bank called the Awqaf Bankasi was established. The capital of this bank was 500,000 liras,500.000.000 grus, and consisted of almost entirely endowed money. Thus, the entire money endowed to the cash waqf system amounted to, at the most, 500 million grus which was still less than the credit advanced by the Ziraat Bankasi alone as mentioned above. In short, the cash waqf system was superseded by modern banks as suppliers of credit.
Apparently there were two distinct reasons behind this decline: economic and administrative. Let us first concentrate on the former. It has already been mentioned that the cash waqfs charged a fixed rate of economic interest that did not change in the long run. The rigidity of this rate was caused by conditions stipulated by the founders at the time of the establishment of these endowments. Once so determined, these rates could not be changed in response to the changing economic conditions and any attempt to do so was considered to be against the law. This is a clear case of information asymmetry: the rates were determined by the founders, who had no information about the economic conditions in the future.
While the rates charged by cash endowments thus remained fixed, other sources of finance that developed were not hampered by such limitations. The sarraf, moneychangers, charged rates determined by the supply and demand for money. Consequently, a capital market developed in which two different rates of interest prevailed.
It was argued above that under these conditions it would make sense to borrow money from cash waqfs that supplied the relatively cheaper capital and then sell this to the sarrafs who would re-sell it with a mark¬up to the public. It was further argued that the trustees of the cash waqfs were in an ideal position to perform such transactions and, indeed, it was shown as evidence for the above argument that they were emerging as major borrowers of capital from the very endowments that they controlled.
Even more definitive evidence supporting this idea has been found in the archives of the Chamber of Commerce of Marseille. The correspondences of French merchants residing in Istanbul inform us that, indeed, the market rate of interest prevailing in that city was substantially higher than the economic interest charged by the cash waqfs of Bursa. To demonstrate this point Table 1 presented above has been re-formulated in order to include information from the French sources.
Economic Interest Charged by Bursa cash waqfs
Market Interest Rate in Istanbul
Table 2: Archives of the Chamber of Commerce of Marseille (ACCM). I am grateful to Ethem Eldem for these French sources.
In one of the French documents (ACCM, J 183), it is clearly stated by the two "deputes" Conston and Reimond that the situation in Istanbul differs substantially from that of Europe. They report that the sarrafs obtain capital at 12% to 13% interest which they then lend to members of "our" nation at about 20% interest without any regard to usury prohibitions. This approximate rate of 12-13% is roughly 2% above the rate at which the cash waqfs provided capital. The 2% difference therefore may represent a mark up charged by the trustees when they re-sell the capital to the sarraf. Moreover, the trustees themselves could also become sarrafs. In this case, the profit of the trustee/sarraf would increase by up to 8% or more. In short, the trustee/sarraf would borrow capital cheaply from the cash waqf managed by him and loan it at a higher rate to a third party. This process naturally closely resembles the essential character of conventional deposit banking.
Finally, by the middle of the 18th century the difference between the economic rates charged by the cash waqfs and the market interest rate prevailing in Istanbul had substantially narrowed. Assuming that the demand for capital remained constant, this narrowing might possibly be explained by an increasing availability of capital which, in turn, might have been caused by more aggressive entry of the trustees into the capital market during these years. Turning our attention to administrative reasons for the decline of the cash waqfs, we must note a major development that affected the entire waqf system: not only cash endowments but also real estate waqfs. This was the centralization drive initiated by Abdülhamid I and continued rigorously by the following Sultans, particularly Mahmud II.
The centralization drive was prompted by the ever-increasing financial needs of the State and the fact that by the beginning of the 19th century large parts of land property in the Ottoman Empire was controlled by the waqf system. Thus, the State was deprived of enormous potential revenue. Moreover, this provocative situation had a shaky legal justification. After all, a major part of this real estate was arazi-i emiriye-i mevkufe, i.e., land that essentially belonged to the State but was made waqf and then eventually claimed by private persons through the icareteyn system explained above. As the rakabe, ownership, remained with the State, the Sultan could justifiably claim that these endowments were evkaf-i gayri sahiha, canonically unsound; and as they were of quasi-legal status and ultimately held provisionally, these waqfs could be revoked. After the destruction of the Janissaries and the resultant unchallenged growth of Mahmud's absolutism, practically all the endowments of the empire were put under the jurisdiction of the Evkaf-i Humayun Nezareti, Minister of Endowments. The waqf lands in this period yielded 44,000 kese revenue per annum which accrued to the Treasury. This amount was initially paid out to the endowments to meet their needs. During the government of Fuad Pasa these payments were called iane, aid. This was followed by a systematic reduction until the iane constituted a mere one-fourth of the original level of payments to the waqf system. Thus, in short, the State first expropriated the revenues that belonged originally to the waqf system and then shamelessly called the meager payments it made, "aid".
Going back to the cash waqfs, we note that they too could not escape Mahmud's iron grip. A directive promulgated in 1863 made it clear that cash waqfs fell within the jurisdiction of the Evkaf-i Humayun Nezareti, Ministry of the Imperial Endowments. Article 14 of the directive instructs the trustees that the annual murabaha, return, of endowed money not assigned for a specific social service must be sent directly to the Treasury and recorded in the registers rather than kept by the trustees. This article is of interest not only because it indicates clearly that the cash endowments did not escape the centralization drive of Mahmud II, but also because it confirms the arguments made above pertaining to the tendency of the trustees to exploit the resources of the cash waqfs to their own advantage. It is self evident that the trustees did not just keep the money in their possession but lent it at a higher rate to the sarrafs or to the public.
At the turn of the century the cash waqfs were put under the control of a separate department, the Directorate of Endowed Money, Nukud-i Mevkufe Mudurlugu, which was to function as an agent of the Ministry. A few years later the bulk of endowed money controlled by the directorate was used for purchasing shares of a newly founded bank, the Bank of Pious Foundations (waqfs), Evkaf Bankasi. Since the Ministry bought the majority of shares, it in fact controlled the new bank. This control was assured by the composition of the board of directors the majority of whom were appointed by the Ministry. The lending regulations of the bank were quite conservative and have been explained in detail (Seyhun, 1992).
By organizing as well as financing expenditures on education, health, welfare and a host of other activities, cash endowments fulfilled services that are today financed by the State or local authorities. Thus, they played a vitally important role in the Ottoman social fabric and did so without any cost to the State.
The aim of this article was to analyse 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.
Cash waqfs were subject to a number of controversies throughout their history. The first debate pertained to the long-term survival of these institutions. This article partially resolved this debate in retrospect: the registers revealed that about 20% of the Bursa cash endowments had survived for more than a century. The complete answer to the debate necessitates the discovery of the survival percentage of the real estate endowments.
The next question addressed concerned the reasons behind the relative success of these "perpetual" endowments. It was hypothesized that capital enhancement in the form of reinvesting the returns, receiving donations from other endowments, or both, played a decisive role in the survival of the endowments. This hypothesis was vindicated and the data revealed that 81% of the, ‘perpetual' endowments had gone through a process of capital enhancement.
Another debate surfaced recently among the economic historians and modern Islamic jurists. While the former had argued that the return of the invested capital of a cash waqf was interest pure and simple, the latter rejected this view and argued that the return percentages stated in the documents pertained to ilzam-i ribh, the requirement that a certain percentage of the return earned was to be paid back to the endowment. This debate was resolved by an analysis of the murabaha/capital ratios of 1563 endowments. There is no doubt that cash waqfs injected substantial amounts of capital into the economy of Bursa. In this context the concepts of capital redistribution and capital accumulation need to be addressed separately: this research based upon the Bursa court registers has indicated that cash waqfs were, primarily, institutions of capital redistribution. The capital accumulated in one way or the other by the original waqf founders was voluntarily distributed to a myriad of borrowers. Thus, redistribution appeared to be the primary function of this institution. It is possible that the cash waqfs were tolerated, notwithstanding the controversial nature of the returns they generated, precisely because of this.
But it originally appeared that while they were thus redistributing the accumulated capital, cash waqfs might have also paved the way for a secondary cycle of capital accumulation by favouring the entrepreneurs over the consumers (Çizakça, 1996: 131-132). That is to say, by providing business capital to the entrepreneurs (borrowers), they might have also enhanced entrepreneurship and generated capital accumulation. If this were true, then the cash waqfs would have to be considered as both capital distributing and capital accumulating institutions. The available evidence from the Bursa Ottoman court records presented above, however, did not support this view. The latest research by Tahsin Özcan on the Istanbul (Üsküdar) cash waqfs also did not indicate any indication about the capital accumulating role of the cash waqfs (2003)The searched for evidence came from an unlikely source; the Venetian archives, where Suraiya Faroqhi discovered documents informing us that the Bosnian cash waqfs, indeed, provided entrepreneurial credit to merchants involved in trade between Bosnia and Venice (Pedani Fabris, 1994). Based upon Professor Faroqhi's discovery we can now argue that indeed cash waqfs functioned as both capital redistribution as well as accumulating institutions. Nevertheless, the true dimension of the capital accumulating function of cash waqfs can only be established by further research. Finally, it was concluded that State policy, more than anything else, was responsible for the final demise of the cash waqfs. The destruction started by Abdülhamid I, gained momentum under Mahmud II and was completed by the Republic in the year 1954, when all the capital of the extant Ottoman cash waqfs were pooled to create a modern bank, the Bank of Awqaf (Vakiflar Bankasi). Yet, shortly after this, with the law of 1967, republican cash waqfs were born. But that is a different story (Çizakça, 2000: 90-110).
6.1. Primary Sources
Bursa, Ottoman Court Registers:
A 23/25 -61b
A 21/27 -33a
6.2. Secondary Sources
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- Cizakca, Murat. Risk Sermayesi, özel finans kurumlari ve para vakiflari (Istanbul: ISAV, 1993).
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- Cuinet, Vital. La Turquie d'Asie (Paris: E. Leroux, 1894), t. IV.
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- Gerber, Haim. Economy and Society in an Ottoman City Bursa, 1600-1700 (Jerusalem The Hebrew University, 1988).
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- Mandaville, Jon E., Usurious Piety: The Cash Waqf Controversy in the Ottoman Empire, International Journal of Middle Eastern Studies,vol 10, 1979, no 3, pp 289-308.
- Masters, Bruce. The Origins, of Western Economic Dominance in the Middle East, (New York: New York University Press, 1988).
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- Özcan, Tahsin. Osmanli Para Vakiflari, Kanuni Dönemi Üskidar Örnegi (Ankara: TTK, 2003).
- Pamuk, Sevket. Coinage and Money in the Ottoman Empire, paper presented at the 6th International Conference of Economic and Social History of the Ottoman Empire and Turkey, Aix-en-Provence, France, 1-4th July, 1992.
- Pedani Fabris, Maria Pia. I Documenti Turchi Dell'Archivio di Stato di Venezia (Roma: Ministero per I Beni Culturali e Ambientali, 1994).
- Roded, Ruth. Quantitive Analysis of Waqf endowment Deeds: A Pilot Project, Journal of Ottoman Studies, vol. IX, 1989, pp. 57-76.
- Seyhun, Ahmet. Centralization Process of Cash Waqfs in the Ottoman Empire and Their Legal Framework (Istanbul: Bogazici University Masters Thesis, History Dept., 1992).
- Yediyildiz, Bahaddin. "Vakif", Islam Ansiklopedisi (lstanbul: Milli Egitim Basimevi, 1986), vol. XIII, pp. 153-172.
- Zilfi, Madeline. The Politics of Piety: The Ottoman Ulema in the Postclassical Age (16001800) (Minneapolis, 1988).
 For "Capital enhancement and Perpetuity" table see Murat Cizakca, A History of Philanthropic Foundations in the Islamic world from the Seventh century to the Present, Istanbul: Bogazici University Press, 2000.
* Prof. Dr. Murat Çizakça was a Professor at the Bogaziçi University, Fatih University and Bahcesehir University. He is currently a Professor of Comparative Economic History, PDP Member, INCEIF, at the Global University in Islamic Finance, Kuala Lumpur, Malaysia.
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by: Professor Murat Cizakca, Sun 02 May, 2010