Journal of Nusantara Studies 2020, Vol 5(2) 48-67
Universiti Sultan Zainal Abidin
ISSN 0127-9386 (Online)
http://dx.doi.org/10.24200/jonus.vol5iss2pp48-67

CIVILIZATION, ECONOMY AND WAQF IN OTTOMAN EUROPE

Mehmet Bulut

Department of Economics, Istanbul Sabahattin Zaim University,
34100, Istanbul, Turkey.
Corresponding author: mehmet.bulut@izu.edu.tr

Received: 16 Jan 2020

Accepted: 3 Apr 2020

ABSTRACTThe prosperity, stability, and socio-economic balance observed throughout Ottoman history was largely
sustained by several key institutions developed in accordance with emerging challenges of the time
whilst functioning effectively. Both the Ottoman economic mindset and impact of those institutions on
the socio-economic and financial development cannot be ignored. In addition to other significant
economic, social and political institutions, the waqf (charitable endowments) played a crucial role in
Ottoman society and contributed to the supply of primary social needs, whether related to education,
finance, health, economy, infrastructure or social stability. This article seeks to explore the role ofwaqfs, especially cash waqfs throughout 15th-19th century Ottoman Europe. It concludes that theinvestment of those waqf-based charity institution in religious, educational, health, and socio-economic
sectors allowed for invaluable contributions in social spheres and public welfare in addition to playing
a crucial role in the economic and financial stability and sustainability of the Ottoman society over long
periods of time.

Keywords: Balkan, cash Waqf, development, endowment, Islamic finance, Ottoman civilization,
Ottoman economy.

Cite as: Bulut, M. (2020). Civilization, economy and waqf in Ottoman Europe. Journal of Nusantara
Studies, 5(2), 48-67. http://dx.doi.org/10.24200/jonus.vol5iss2pp48-67

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1.0 INTRODUCTION
Civilizations in general embrace all kinds of organized life activities and contributions whether
related to economics, politics, education, architecture, art, literature, science, technology,
religion, social and civil life, at the level of states, government or societies. Civilizations also
pursue the fulfillment of certain goals and objectives whether on the physical, cultural, or
intellectual-spiritual fronts which provide them with the soil necessary for life, growth, anddevelopment. Just like Eastern and Western civilizations, the same logic also applies to theIslamic civilization. The civilization of Islam has its own peculiar identity, characteristics andvocation. However, among the fundamental principles of the civilization of Islam is to thefulfillment of tawhid (unity) and justice (adalah) in this world (Ibn Khaldun, 1967; Bulut,
2009; Bakar, 2014).
For most civilizations however, institutions play crucial role in the advance of social,political and economic life as well as contributing to the very objectives of those civilizations.
History points to that fact that Islamic civilization highly promoted good economic practices
and cultures of solidarity, sharing, philanthropy, social welfare and active establishment andoperation of charitable institutions and endowments (waqfs-awqaf). In Arabic language,
waqf signifies habous/habs which implies ‘to stop or to make something stop’. Technically
however, the concept of waqf is to present usable material or physical spaces for the benefit ofthose without provision. An individual who endows an estate or property permanently halts its
functions for anything other than its gains and earnings for the interest of the public. The
Islamic tradition strongly promotes the carrying out of good deeds for the benefit of the generalpublic including the endowment of waqfs for various community and societal causes. Prophet
Muhammed (a.s) is reported to have said: “When a person dies, his acts come to an end, except
three things, ongoing charity, useful knowledge (by which people benefit), or virtuous
descendants who pray for him.”1 The Qur’anic exhortation of spending for good causes has
had a major impact on the practice and development of waqfs2.
In Muslim societies, waqfs contributed to the provision of a series of public
services such as the financing of libraries, madrasahs, schools, scholarships, educational
services; building of bridges, fountains, roads, sidewalks, and waterways, as infrastructural

1

Prophet Muhammad (a.s) is reported to have said: “When a man dies, his deeds come to an end except for three things: Sadaqah Jariyah(ceaseless charity); a knowledge which is beneficial, or a virtuous descendant who prays for him (for the deceased)” Muslim. Riyad Us
Saliheen. Book 13: Hadith 8.
2

The Qur’an states: (Never will you attain the good [reward] until you spend [in the way of Allah] from that which you love. And whatever

you spend - indeed, Allah is Knowing of it) (3: 92).

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services; as well as masjids, lodges, and zawiyahs. Waqfs also helped in the survival ofcaravanserais and inns which helped lower the cost of accommodation for merchants, thus
allowing

trade

to

flourish. Shops,

baths,

libraries,

markets,

andbazaars(bedestans)3 were established as waqfs and were part of ensuring the sustainability ofcommercial and financial life. Because of their structured nature, and especially during times
of

state

weakness,

upheavals,

or

unfavorable

economic

andpolitical conditions, waqf institutions never cease to offer their services; this secured thecontinuity of educational life, infrastructural needs and religious services, at worst
with minimal interruptions.
Muslim waqfs fulfilled many responsibilities and services of modern states, and for
this, were largely able to alleviate the state’s financial burden. For instance, waqfs assisted thepoor and needy and provide for their various needs, continued to function throughout social
unrests, and were also valuable to the establishment of socio-economic justice. Like manyother Muslim communities, the Ottomans gave waqfs remarkable importance andinstrumentalized them in the way of development and civilization building; that explains
the naming of the Ottomans, ‘the civilization of waqf’. Towards the end of the 18th century,
there were 20000 waqfs in the Ottoman Empire, which made up one third of the total economy.
In addition to the traditional property-based waqfs, the Ottomans also introduced new forms oftransferrable waqfs known as Cash Waqfs. This practice first appeared in the Ottoman Europe
during the first quarter of the 15th century.
Throughout the history, empires and states, both in the East and West, dominated larger
areas and outlived the Ottoman Empire. However, the state with the longest duration, as asingle dynasty, was the Ottoman Empire. Empires are long term structures of the stationary
agricultural periods of pre-modern ancient traditions. The Ottoman State is among the largest
and longest standing states founded and sustained by Turks and Muslims in history. The statefounded and sustained by the Ottomans for more than six centuries which continues to live inmodern times in such time of rapid change and transformation, required indepth examination.
The study of the causes of long living civilization appears represent for many social scientists
in the geography one of the highest research priorities. There is no doubt that the very
institutions they founded and developed, in addition to the values, worldviews they embraced
and view of humanity and society, have had clear impact on the longevity of the Ottoman state3

Bedesten is a covered bazaar usually established near a mosque in order to transfer the rental income to the Mosque’s needs. Artisans,merchants and others carry out business in the bedesten.

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and the very civilization they built and developed. What is interesting in the long-term
structures is the consistent integrity between the mindset and institutional structure. The
tendency to think in longer terms for the work they do and institutions they established, whichappears to echoed the notion of “respect for scholarship and scholars”, all made within theconceptual framework of “Make humans live so that the state lives” is what draws the attentionof many researchers today. Within this in mind, “waqf ” institution appears to be represent oneof the most important institutions in the Ottoman world, with an approach that look at theeternal gain, “that will continue forever” and accordingly, and with priorities making “the mostprofitable investment”.
This review paper is instrumental especially given the need of Muslim societies today
to effectively transform some of their current institutions according to unique dynamics anddevelopment paradigms. Among those transformed and perhaps long-lasting institutions arecharity institutions which historically have proven their capability of consistently sustaining
themselves and make core contributions to the socio-economic and intellectual life of the
Muslim communities. One of the key institutions that emerged in the Ottoman world during
such a process of transformation were charity funds which started in the 15th century, withnumbers continuing to increase in the centuries to come. As the intensive debates continue to
unfold amongst Muslim scholars on the legitimacy of those institutions, the number of charity
funds rapidly increased and particularly in the 17th century because of the new developments
and changing conditions of the global then economy and financial order.
With growing volumes of trade, developments in warfare technology, long distancejourneys and increasing population, the economic structure evolved from in-kind to cash
economy. The emergence of financial institutions established on the basis of a new interestfree charity concept emerged in order to provide the necessary cash for production and trade,
and also to ensure stability in the credit and financial markets throughout the many cities of the
Ottoman Empire. This came as a result of the moral and legal acceptance of interest-basedbanking institutions, along with the influence of the American gold and silver in the West. In
particular, with respect to the transformation of the money and financial markets, the Ottoman
Empire achieved this very transformation, however, within a flexible structure, remaining loyal
to the society’s beliefs, value system, ethical norms, and worldview. As a result of thistransformation, Cash Waqfs emerged in the 15th century in the Ottoman Empire, and thus
micro-finance institutions grew widespread in the following centuries.
Since their emergence however, Cash Waqfs (charity institutions) have had significant
impact on the Ottoman religious, spiritual, socio-economic, and intellectual life. In this regard,
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the economic importance of charities and their impact on finance, economy and society havedrawn interesting discussions according to which, analyses made on charity institutions andalso Ottoman studies, have concluded that expenditures on education, health, industry, tradeand infrastructure were financed through those very institutions with market roles of financial
and credit institutions. However, the emergence of charity funds in the face of changing
economic and financial conditions brought forth different arguments, such as for example theperception of those institutions in affiliation with affluent individuals of the Ottoman society
who used their charities to bequeath their wealth upon family members.
The paper critically reviews the effects of charities on socio-economic life and sheds
light on the debates on charity funds. It focuses on the endowment deeds of charity funds
established in the Balkan region of the Ottoman State which were selected in the light of theirimportance as trade and industry zones of the empire. The latter has attached importance to thisgeography as a result of its proximity to Europe. The Balkans persistently sustained its
existence within the Empire since the period of its annexation. For those reasons, examples ofcharity fund whose endowments deeds have been identified in the Balkan geography have been
selected for examination. Following the examination of the socio-economic structures of thecharity founders in the light of the data from endowments deeds, the distribution of charity
capital and yield rates and returns, as specified by the deeds of endowments, are also examined.
While the world GDP has reached near 100 trillion USD, more than three billion
humans continue to endure deplorable living conditions. Waqfs hold the potential to play amajor role in solving much of those enduring issues today. However, more research is neededon the current strategies and means used to revive the waqf for the purpose of problem solving,in addition to how the Ottoman waqf model, which towards the end on the 18th century
represented 1/3 of Ottoman economy, be further explored. Presently, Muslims are keen toinvest in the development of new institutions without neglecting their traditions and past
heritage. However, the following interesting questions emerge: 1) Given that waqf is a
productive institution, how could one draw on the Ottoman waqf heritage in order torejuvenate and develop brand new productive sector?; 2) How would waqf today resolve
current socio-economic challenges, and especially pertaining to alleviating poverty andsustaining social justice; 3) How can the Ottoman cash waqf model be integrated into plans of
economic and financial sustainability; and finally, 4) How can Cash Waqfs be used for microfinancing and productivity optimization?

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2.0 OVERVIEW OF SCHOLARLY WORKS
Civilizations build their institutional structures in line with the concept of humanity andsociety. This exhibits itself in all spheres, whether pertaining to education, economy, army,
culture, politics, literature, or finance, and both in daily life and in institutional structures. In
this respect the Ottoman civilisation in general, have been studied by several authors (e.g.
Barkan, 1980; İnalcık, 1997, 2006, 2009; İhsanoğlu, 1994; Genç, 2000; Tabakoğlu, 2008;
Pamuk, 2010; Kazıcı, 2014). One may argue that the Ottomans built a civilization of waqfs in
Europe, after they moved from Anatolia to the Balkans. However, works on Ottoman Balkan
civilization are still very limited (Lowry, 2008; Eren, 2018; Bulut, 2017). Moreover, theOttomans included Cash Waqfs in their conception of waqfs services, which played crucial
functions and role in the Ottoman Balkan civilization.
Çizakça (1995) studied the Ottoman Cash Waqfs in Bursa (Anatolia). Similarly, Özcan
(2003) discussed the Ottoman Cash Waqfs established in Üsküdar (Anatolia, Istanbul) during
the sixteenth century. Peri (1992) analyzed the role of waqfs and the Ottoman welfare policy
in general. There are some studies on Ottoman waqfs that focused rather on the different effectsof those institutions on the socio-economic development. One argument is that those charities
institutions hindered the accumulation of capital in a single pool, which represented asignificant obstacle to economic development (Kuran, 2003). Another argument sees that thetrustees, who represented the high-level executives of charity funds, borrowed from theendowed money and transferred it to big merchants with higher profit rates (Çizakça, 2000;
Pamuk, 2004). Answering these arguments within the limitations of this study may further
expand the boundaries of the subject matter and pave the way for new research horizons.
However, it would be appropriate to stress that most of the charity fund returns were distributedin the form of fees. Moreover, in terms of civilization paradigm, we are in need of a muchholistic approach to the study of Ottoman waqf mindset, values, system, organization, andculture.

3.0 OTTOMAN WAQF CULTURE
Nevertheless, endowment institutions were not first founded by the Ottomans, they howeverused waqf institutions as one of the main drivers of their economic and social structures (Peri,
1992). Waqfs operated as a third sector, in addition to both the public (state) and private
sector. The Ottomans established thousands of waqfs which served both the public andanimals, resulting in the formation of an unprecedented waqf based social structure. They
were also successful inthe complete

integration
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of

waqfs

into

their

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economic life system. Waqfs was also institutionalized and extended to remote areas. In the
18th century, waqf

generated incomes equaled asubstantial portion

of

state

revenues (Yediyıldız, 1984) which implied that waqfs held both economic and social
contributions.
The Ottomans used waqfs as a public policy instrument in view of its major role in theirsocio-economic development. Waqfs helped in the construction and establishment of Ottoman
citiesandfurther provided municipal

servicesintheabsenceofinstitutional

municipalities. Major state officials established major waqfs which secured basic municipal
services such as bridges, roads, sidewalks, and waterways. Moreover, caravanserais, inns,
shops and other business helped further the economic development of Ottoman cities.
Waqfs also ensured prevention of violations on property rights against potential
government and state officials, preservation and financing of rich Islamic architectural andcultural heritage, dealing with heavy taxation during depressions and wartime, preventing the
break-up of land due to Islamic law, providing pensions for the elderly and disabled, foundingof basic social security and insurance systems, building of and preserving the continuity ofalms houses, bridges, cisterns, fountains, roads, harbors, libraries, lighthouses, mosques,
schools, sidewalks, soup houses, waterways, and weirs etc. (Bulut & Korkut, 2016).
The role of larger waqfs in economic development was significant. A single large waqf
was at times capable of developing an entire city. For example, the Waqf of Bosnian Governor
Hüsrev Bey was one of those. Hüsrev Bey endowed 15,000 gold coins of miskals (equal to55,000 dirhams), 200 miskal of pure gold (equal to 133,000 dirhams), 120,000 dirhams, 13
Bedehşan pearls, 80,000 dirhams (equal to 62 valuable pearls), 50,000 dirhams (equal to 70
round pearls), 20,000 dirhams (equal to 100 pearled prayer beads), 90,180 dirhams (for ornate
swords and daggers, gold ornamental knives and other various jewelry), 1,570,000 dirhams
and 3 villages of Zihne known as Kurumişte, Vitaçeşte and Kusiritur, 3 villages of Drama
District known as Nesiy, Davud and Zigosni, farms, mezraas, pastures and more than two
hundred cattle and sheep on these pastures at Serez District, mezraas, farms, pastures andmeadows, mills, houses, shops, and beehives in various districts, towns and villages for the
repair costs, staff wages and other expenses for the mosque, soup house, lodge and madrasah
that he built in Sarajevo in addition to other charity services4. This waqf still continues its
activities in Sarjevo to this day.

4

The waqfiyah of the Waqf of Bosnia Governor Hüsrev Bey, Waqf Record Archive: Register: 1595, p. 1, no:1; Register: 633, p. 139, no: 48;

Register: 633, p. 142, no: 49.

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Although large waqfs were important for the economic development of cities, one of
the greatest contributions of the Ottomans to the waqf institution was to pave the way to thepoor also to establish waqfs. In the past, only the rich could establish waqfs using theirpossessions and property, however the Ottomans were able to develop a system that allowed
the poor to establish waqfs and were able to create such opportunities using Cash Waqfs.

4.0 OTTOMAN CASH WAQFS
Cash Waqfs denote waqfs based in cash money as capital. The Cash Waqfs differed from otherwaqfs founded on the basis of real estates set for rental income. The source of Cash Waqfs did
not originate from the rent of endowed real estates, instead, the source of income was donatedmoney. Like other waqfs, Cash Waqfs were also established to serve people for the sake ofAllah. The capital of Cash Waqfs were generally given as one-year loans to borrowers. The
return of the capital was spent for the various purposes of the waqf. The benefit of the CashWaqfs was not just limited with the purposes of the waqf, those waqfs also offered loans toentrepreneurs in the market (Çizakça, 1995). Therefore, those objectives of waqfs were
twofold: 1) financing and holding the purposes of the waqf as a social effect, and (2) extendingloans for entrepreneurs as an economic effect.
It is worth mentioning that the Ottomans sought to abide by the principles and valuesof their Islamic faith, and ruling of their Sunni legal Hanafi tradition, to which many belonged,
and were of the view of considering both economic and social practices. This tradition
originated from the Seljuks. The appointment of qadis from the Hanafi denomination and theapplication of Hanafi fiqh in the courts was the predominant politics of the Seljuks and their
Ottoman successors. The Hanafi denomination was applied in the Ottoman courts in Anatolia
and Rumelia Provinces in order to provide legal unity and stability until the 16th century.
Occasionally, the views of other denominations were also borrowed in specific situations as
required by social necessity and equity law. However, this practice was limited. The
defendants, however, did not have the right to choose out of the four legal denominations incourt.
Following the 16th century, it was clearly stated that court decisions were given
according to Hanafi denomination at the qadi and mufti certificates. This practice continued
without pause in the Anatolia and Rumelia provinces. A Hanafi head-qadi was appointed in
the regions which belonged to other denominations such as Mecca, Medina, Aleppo, Quds andCairo, etc. In this way, locals could solve their problems within the framework of theirdenominations (Aydın, 1995; Bardakoğlu, 1997). The Ottomans also followed the Hanafi fiqh
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ISSN 0127-9386 (Online)in the practice of Cash Waqfs. The discussions and establishment processes of Cash Waqfs
were all held under the Hanafi denomination. In both the court decisions and waqfiyyahs, those
discussions and establishment phases are clearly visible.
Although Abu Hanifa was the founder of the Hanafi denomination, the Ottomans drew
mainly on the views of his students on waqf related issues, and especially on Cash Waqfs. The
first debate was related to the waqf of movables. The second debate was about what was to beconsidered as movables. The last discussion was related to the withdrawal after theestablishment of the waqf. Abu Yusuf and Imam Muhammad are of the opinion that movables
can be endowed as the waqf capital. They also argue that the way of endowing movables was
to attach them to a real estate as in the example of endowed copper boilers and trays with ahouse. Imam Zufar was hold the view that one is allowed to donate money this way andproposed the mudarabah method as the way of operating money.
Following those initial discussions, other discussions were held over the establishment
process. Abu Hanifa supported the view that waqf may be terminated by the founder or her/his
successors, who have the right to take endowed property back. This, in his view, was because
an endowed goods or real estate of a waqf were not the property of the waqf in perpetuity.
Other mujtahids however, held different views. Abu Yusuf for example was of the view thatthe property rights on endowed good come to an end. He based his argument on that tradition
that Prophet Muhammad and his companions did not turn back on their decisions uponendowing some of their properties. The Ottomans who used the flexibility of the fiqh systemsolved this problem as follows (Çizakça, 1995):

Informing thecourt about
the intent anddemand forwaqf
establishment

The court
decision for
the waqf
suitability

The foundergives up anddemands his
endowmentfrom trustee

Trusteerefuses his
demand andthe case goesto court

The judge
decides that it
will not beback when
the waqf isestablishedSource: Bulut (2019)
Figure 1: Legal processes for waqf/cash waqf establishment

Besides those discussions of prominent Hanafi imams, Ottoman scholars were not in fullconsensus on the Cash Waqfs. For example, Ibn Kemal, Ebussuud, Bali Effendi supported theestablishment and operations of the Cash Waqfs. On the other hand, Çivizade and Birgivi
opposed the idea of Cash Waqfs. As the shaykh al-Islam, Çivizade forbade the Cash Waqfs

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and sent his decision to the ruling class and religious officials. The results of the ban were
devastating. Bali Effendi wrote letters to the Ottoman Sultan and Çivizade in which hedescribed the problems resulting from the ban and requested that the ban be lifted. Those letters
are interesting as they show the social structure of society. Birgivi’s criticism of Cash Waqfs
was rather about the aspect of practice. He claimed that the methods used in Cash Waqfs were
not appropriate for Islamic rules and were, in fact, interest bearing transactions.
However, Ebussuud, the then shaykh al-Islam of Ottoman Empire for a period of nearly
thirty years, ended the discussion by allowing the establishment of Cash Waqfs in a legal
process. The cash waqf found religious and legal base and support with Ebussuud’s decision(Okur, 2005; Öge, 2010; Özcan, 1999, 2003; Şimşek, 1985). All of those discussions highlightthe sensitivities of the Ottomans to comply with the Islamic rules. The Ottomans received
support from the religious authorities on the Cash Waqfs. Especially during the banning of
Cash Waqfs between 1545 and 1547, the refusal of people to establish waqfs was a sign ofclear religious and spiritual sensitivity of the larger society. Therefore, the effects of religious
authority on society were not limited to the religious area, but also affected society’s economic
and social life together. This effect also touched waqfiyyahs and led to the legalization process
and writing of views and fatwas of mujtahids.
Waqfiyyahs provide a general framework of the waqfs including: the name of waqf
founder; region of registeration name of trustee; capital of waqf; methods of cash
operation; borrowing/financing rate; waqf purposes; general description of people who can andcannot borrow from the waqf; legalization process according to the views of mujtahids;
181st verse of Chapter Two of the Qur’an5; date of registration; names of the witnesses are
written in a simple waqfiyyah of a cash waqf. Thus, thanks to waqfiyyahs, not only the
economic dimension of the waqf, but also the social and religious aspects are recorded andunderstood.

5.0 FUNCTIONS AND EFFECTS OF CASH WAQFS IN THE OTTOMAN WORLDThe Ottomans enjoyed a comprehensive economic and financial system with a different formof economic and financial mindset than Europe at the time. They established a financial system
based on an altruistic model with Cash Waqfs right at the center of this model. The basic aimof Cash Waqfs was not to take profit. This does not suggest that they were not productive. Its

5

The Qur’an states: (Then whoever alters the bequest after he has heard it-the sin is only upon those who have altered it. Indeed, Allah is

Hearing and Knowing) (2 :181).

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effectiveness and productivity should be grasped within the worldview of the Ottoman
altruistic economic mindset and balance in the society.
Like the other types of waqfs, the establishment of Cash Waqfs were entirely dedicatedto the arising needs of society. Cash Waqfs did not only provide the services offered by today’s
modern states, but also engaged in financial intermediation like just like today’s Islamic banks.
Cash Waqfs were essentially based on four distinct principles in order to fulfill
their relevant functions: (1) They operated with Islamic/ethical methods while providing loans;(2) The loans were not great amounts but rather in the form of micro-credits; (3) Cash Waqfs
did not have branches spread across the country, but rather represented regional institutions;and (4) they were established according to the needs of society (Bulut & Korkut, 2019). The
activities of Cash Waqfs had been molded according to these principles which also represent
the fundamental characteristics of the Ottoman finance system. This system can be defined as
an altruistic or philanthropic financial model whose foundation was made possible throughwaqfs.

Islamic/
ethicalmethods

Need-based

The
Cash
Waqfs

Microcredit
mechanism

Regional
institutions

Figure 2: Principles of the Ottoman Cash Waqfs

The Cash Waqfs used interest-free methods in loan transactions. Islamic prohibitions hadbound the limits of these methods. As mentioned earlier, criticisms concerned the methods
applied in Cash Waqfs as interest bearing transactions. However, one can safely say that when
the context of society’s Islamic sensitivity and the various conditions recorded in waqfiyyahs,
the Cash Waqfs sought to avoid the interest-bearing transactions and even risk of interest. This,of course, might not apply to all Cash Waqfs. However, it is also not possible to state that CashWaqfs were lending by interest. The cost of borrowing at Cash Waqfs was generally between
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10% and 15%. The fact that the borrowing rate was determined by law reduced the occurrenceof usurers in the financial market. This rate remained stable for years. Thus, financial stability
was secured in the market and entrepreneurs could foresee the borrowing rates. This rate also
prevented capital accumulation because it was very close to the profit rates in the trade market(Bulut, 2017). One of the factors that prevented the accumulation of capital in certain groups
and persons in Ottomans was the borrowing rate in the Cash Waqfs.
Although very large Cash Waqfs were established, they usually provided small amountsof loans. People who used credit from Cash Waqfs were entrepreneurs like artisans, farmers,
and traders etc... That means that they operated rather as microcredit institutions. The CashWaqfs has had a vital prescription in the period when money supply was limited. New
investments, production and trade were possible with loans provided by Cash Waqfs to themarket. Despite being Europe’s neighbors, the Ottomans did not create embedded conventionalbank institutions in the Ottoman economic realms or Ottoman financial system until the second
half of the 19th century, thanks to Cash Waqfs. The Cash Waqfs provided serious alternative
for conventional banks for years. Those institutions also played a key role in the stability of thefinancial markets in long run. As shown in Fig. 3, in the long run, in spite of the stability of theborrowing rates of the Empire, the cost of borrowing in Western European nations was
generally lower than that of the Ottoman world. The accumulation of capital was higher inWestern Europe than the Ottoman Empire in the early modern times.

25
20
15
10
5
0
16. Century
Ottoman

17. Century
England

18. Century

FranceNetherlands

Source: Bulut (2019)
Figure 3: Comparison of borrowing rates

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Cash Waqfs were regional institutions and primarily effected regions in the Balkans where they
were founded. The purpose of Cash Waqfs also focused on regional institutions such as amadrasah, village mosques, masjids, or bridge located in the same region of the waqf. In thisrespect, Cash Waqfs played active regional roles of social development. Moreover, thanks tothe staff working in the institutions they financed, they also had effects on the regional
employment market. Thus, Cash Waqfs were also decisive in the regional wage market.
Although Ottomans gave importance to strong centralized authority, they also enjoyed very
flexible structure in meeting regional needs. The Cash Waqfs were successful in solving ofregional problems rapidly, as the establishment process was easy and the transaction costs wererelatively low.
Like other types of waqfs, Cash Waqfs were established for specific purposes such as
education, infrastructure, religiosity of the society and so forth. The Cash Waqfs financed a lotof structures and institutions from mosques to schools and madrasahs, bridges to sidewalks,
fountains to waterways, etc. In this way, they took over some of the government’s tasks andeven lightened up the state burden. The one who choose to establish a cash waqf set its mandate
and purposes in accordance with the needs of the region where founded. In addition, CashWaqfs also responded to the need of financing entrepreneurs. Since the Cash Waqfs operated
under the purposes of the waqf, they were one of the institutions that met diversely criticalneeds of society which had a financial side.

6.0 CASH WAQFS AS PIONEERS OF ISLAMIC FINANCE
There was no example of a country or a society that could remove interest bearing
transactions through legal regulations. Even Islamic modern financial institutions were notvery successful. These institutions generally preferred the murabahah method rather
than mudarabah or musharakah methods based on partnership. Considering the criticism of
the method of murabahah, it is a fact that the interest debate had been going on for centuries.
One way to overcome those issues is the non-profit waqf institution. Especially in Cash Waqfs,
there are no interest or high profit targets as is the case of banks. Nevertheless, Cash Waqfs
conducted the same transactions as banks. The accumulated capital of philanthropists was used
to finance charity works without any expectation of profit whatsoever. Additionally,
entrepreneurs could find the chance to take loans from the Cash Waqfs. In this way, the cash
waqf does not only help reduce interest by boosting competition in the loan market andlightening the state burden, but also secure justice in income distribution (Çizakça, 1998). The

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Ottomans used these features of the Cash Waqfs from the 15th century until they the time when
they got dissolved in the beginning of the 20th century.
The Cash Waqfs operated both under Ottoman laws and Islamic jurisprudence. Thus,
the funding practices of Cash Waqfs were arranged without interest. The mostly used methods
like beyʻi istiglal, bidaʻa, and mudarabah. As per the archived waqfiyyahs documents, thosemethods are eight: beyʻi istiglal, bidaʻa, buy for renting again, istirbah in military court,
mudarabah, murabahah, operations/transactions at Ministry of Awqaf, and qard hasan. Someof those methods are also used by modern interest-free financial institutions. There arecontroversial methods as well. However, cash waqf founders set the conditions of interest-free
activity at loan transaction in the waqfiyyahs. The income of the foundation is defined as profit6,
not interest (Döndüren, 2008). As can be seen, the methods used by Cash Waqfs have set an
example for modern interest-free financing methods. It should be noted that Cash Waqfs
provided financial intermediation services, even if they were essentially charitable institutions
with no aim for high profit.
Both Cash Waqfs and modern interest-free institutions are dependent on partnershipmodels, not debt-based system. At this point, the murabahah method may be confusing. But
the main methods such as bidaʻa and mudarabah were based on partnership. In some
waqfiyahs, a detailed description of borrowers was an indication of this. In particular, thecondition that craftsmen and merchants were only on the borrower side showed a basic use ofpartnership-based financing at Cash Waqfs7. Hence, those waqfs were based not on risktransfer but rather risk-sharing. Moreover, their legal basis was firstly rooted in the Quran,
Sunnah, consensus, legal analogy (qiyas) and secondly in the Waqf Regulations8.
The cash waqf income made from operation was not to be given to certain groups or
people. The profit was distributed according to the purposes written on the waqfiyah. Those
purposes are generally divided into four groups: (1) needs of institutions such as libraries,

6

Profit is mentioned in waqfiyahs as ribh.

7

The waqfiyah of the Waqf of Haji Bali b. Mehmed, Waqf Record Archive: Sarajevo Gazi Husrev-beg Library, V-150568: …Meblağ-ımezbûr üç yüz bin akçe evkāf-ı mezkûre ve hayrât-ı mestûreye mütevellî olan kimesne mübâşereti ve nâzır-ı pür-mefâhir maʻrifeti ile tarîk-işerʻî kavîm ve nehc-i merʻî müstakîm üzere rehn-i kavî ve kefîl-i melî veyâhûd muktezâ-yı hâl üzere ikisinden birini alub riʻâyet-i şerâ’it-işerʻiyyede ikdâm-ı tâm ve ihtimâm-ı tamâm idüb her on akçesi her senede on bir akçe olmak üzere ale’l-vechi’l-helâl istirbâh ve istiğlâl içün
muʻâmelâtı sahîh-i münʻam ve mütemevvil tüccâr-ı zevi’l-iktidâra ve erbâb-ı sanâyiʻ ve ehl-i pazara ve yerlerinde dağ gibi mukîm vemuʻâmelelerinde ser ü bâğ gibi müstakîm olub edâya kudreti ve kazâya mikneti olan kimesneler ile muʻâmele oluna ve erbâb-ı tüccâra ve sâirehl-i sefere ve zümre-i ummâla ve ehl-i tezvîr ve ihtiyâle ve ehl-i hevâ ve ricâlsiz tâ’ife-i nisâya virilmeye… (Eng. The 300.000 akches endowed
capital was given only to artisans, craftsmen and merchants who are honest and resident at same district as loan with a 10% borrowing rate.
Non-residents, state officials, dishonest people, and single women cannot borrow cash from the waqf.)
8Regulations about waqfs were arranged with Evkaf Nizamnamesi (Eng. Waqf Statute) in the Ottomans.

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masjids, mosques, schools, etc. financed through waqf; (2) salaries of employees at funded
institutions; (3) salaries of employees at the waqf; and (4) charity works such as providing
financial assistance to poor and needy, distribution of foods, financing dowries of poor girls
etc. Thus, the Cash Waqfs fulfilled a significant social service as funding institutions andmaking charity works while contributing to the employment and financial market.

Mac.:Macedonia, Kos.: Kosova, Alb.: Albany, Sir.:Sirbia, Rom.: Romania
Source: Bulut (2019)
Figure 4: Course of yield rates in centuries per regions in the Balkans

As seen in Fig. 4, the yield rates specified in the deeds of endowment remained and for many
years between 10 to 15 percent, as a determinant of financial stability. This ensured long-term
financial stability in the Ottoman Empire, and that entrepreneurs would know in advance about
the costs of the sources they would obtain to finance their investments. It can also be seen as
in Fig. 4 that a constantly decreasing return/yield rate for a 100 year period between 15001600s in Bosnia and Herzegovina. Besides, it is observed that the return rates per periods (for
400 years) remain at the lowest levels in Bosnia and Herzegovina, as compared to all otherregions in the Ottoman Balkans. In Bulgaria, however, it is understood that they remained at
the highest levels.
As charity institutions, Cash Waqfs were not established as entities required for socialand religious services only. Necessary economic organizations were established to sustain
those religious activities in a stable manner in the long term, and their financing requirements

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were met separately (İnalcık, 2006). Separate charities were established to finance theestablished lodging facilities, bazaars, shops, and to meet the economic resource needs of othersocial activities. Ottomans established hermitages, caravansaries and lodging facilities formerchants and their caravans on specific and significant points of trade routes. Thanks to thosestructures, trade within the borders of the Empire was both secure and less costly for merchants(Bulut, 2009). It was found that by the year 1530, there were 622 hermitages in Anatolia only(İnalcık, 2006). Financing of schools, madrasas, social complexes, roads, bridges, hospitals
and etc., and other critical structures and those which have a direct impact on the social life,
were all provided by the institutions established under charities, which had financing returns.
Accordingly, one can safely say that the charity institutions used profits they made primarily
for services that increased social welfare, balanced the distribution of wealth while reallocating
the remaining profits and savings for investments and transferred them to high returnsproducing activities. That means that based on efficient management, the Ottomans were able
to create a sustainable waqf model in the Balkans which expanded to all other corners and partof the Empire in the following centuries.
The Ottoman Empire continued to keep its central position in the full spectrum of
economy and managed to keep its strong grasp on the economic institutions like guilds andmarkets, for a long period of time (Bulut, 2008). In addition to those institutions, charities were
supported and promoted by the central administration. Basically, the primary goal was toensure a self-sufficient economic structure. And, in addition to the natural economic
institutions, charities assumed a critical role in terms of ensuring self-sufficiency andredistributing wealth, in a closely related way to the economic policies of the Ottoman Empire.
Cash Waqfs emerged as an extension of charity institutions set to finance theinvestments made to maximize social benefit and social welfare. Investments mostly financed
regional expenditures such as health, education, and infrastructure. Charity funds are
institutions that were established and developed mostly by individuals of high welfare levelsin the society, in consideration of both investments for this world and the gains in the afterlife.
Resources endowed by the charity founders were used for the provision of charity works,
investments, public expenditures, credit, and financial transactions. In the credit transactions,capital was transferred to the debtor with a contract that guarantees debt payments at a ratio
between 10- 15% (Figs. 2 and 3). The returns that arose in the borrowing relationship wereused for realization of the purposes of the charity. Therefore, cash waqf became widespread
institutions in a wide spectrum of settlements, from villages to large cities, with significant
roles in creating the basic components of many villages and towns in the Ottoman Empire.
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7.0 CONCLUSION
Cash Waqfs played key role in the history of the Ottomans and Islamic civilization. While only
wealthy people could establish waqfs at first, Cash Waqfs made it possible for many toestablish waqf using small deposits only. In addition to Cash Waqfs keeping their waqf values
alive, more important was their many effects on economic and social life. The institution ofCash Waqfs shows unique economic mindset. The Ottomans resisted transformation within
their own institutions, while capitalist institutions in their neighbor Europe were active in
addition to capitalism increasingly affecting the map of the world. Rather, the Ottomans ruledwith a distinct economic mindset and paradigm at a time when the idea of more gain and profit
making became the priority. The Ottomans interest in improving the societal well-being wasdemonstrated through real yet very successful practices. This policy largely focused onincreasing people’s prosperity and balance in society9. While the capital was accumulated in
private sector and individuals in Europe, the Ottomans did not encourage this to happen in theirhomes. The state did not exercise an oppressive influence on individuals for capital
accumulation in Ottoman society. Institutions of waqfs provided this opportunity. Thanks to
the waqfs, the Ottomans built a system in which neither the capitalists nor the state hadcomplete control over it. They distributed the surplus income and wealth to all members ofsociety rather than to an economic class like as is the case of capitalism or state elites like insocialist system.
Cash Waqfs were involved in the Ottoman system, both in terms of social and financial
aspects. Not only individual entrepreneurs, but also craftsmen, farmers, merchants, tradesmen
got the needed credit from the Cash Waqfs, providing for healthy economic circulation. The
surplus income was spent in line with the objectives of the waqf so to avoid unjust individual
fortune making. In addition, those institutions established Islamically-based financing
mechanisms facilitating for those in need to obtain cash in accordance with their religious
beliefs and values. While some of those methods may be considered objectionable by somereligious scholars, the Cash Waqfs is still pioneering in term of today’s Islamic financial
institutions. The Cash Waqfs that met the financing needs of the Ottoman society for a periodof five hundred years also showed the flexibility of the Ottoman law system. Unlike real estatewaqfs, income was easier to get through Cash Waqfs. The transaction costs were lower andprofits were higher. In this respect, more resources were transferred to the waqf works. Despite
all of the economic and financial aspects, the basic priority of Cash Waqfs was charity services
9This policy is also known as ibadullâhın terfi-i ahvâli (Eng. to improve the status of the servants of God).

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and waqf purposes. The Cash Waqfs were altruistic financial institutions shaped within theframe of the Ottoman economic mindset. Having continued their activities until the last termof the Ottomans is an indicator of their success. Thanks to the unique institutions such as CashWaqfs, the Ottomans secured balanced society and sustained one of the longest empires in theworld.
In the period when the European states acquired many colonies around the world tofeed their home capitalist economies, the Ottomans were neither colonized nor colonized others
despite their geographic proximity to Europe. They rather provided aid to poor and exploitedstates. Based on the Ottoman economic philosophy, Cash Waqfs put charitable purposes first.
However, there is also financial dimension to Cash Waqfs and because of that, Muslim traders,
producers, and entrepreneurs were able to borrow money using halal avenues which was very
crucial for sustainability of waqfs and long term operation. That also highlights the importanceof profitability and sustainability management of Ottoman cash waqf system. Moreover, sucha model can be thought of as an altruistic finance system. Today, Muslims need to resolve theircurrent financial problems with both the institutions they have historically established and theIslamic economic philosophy. Muslim scholars also need to analyze the practices andinstitutions in order to ensure the success of their theoretical models in the current climate. In
particular, the cash waqf should be given proper attention as it stills represents a viable
alternative to the current financial and economic system and moral dilemmas.

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