Comparison of Cash Waqfs of Ottoman Period with Participation Banks

Cash waqfs are voluntary structures established by the state and society in the Ottoman Empire, through which the needs of the state and society of the period were met, in some of which the entire capital was in cash and in the others, a certain part of it was in cash. The volunteering aspect did not end up with the underestimation of these institutions and it has lightened the state's burden from time to time. 

BLOG 23.08.2021, 10:00 17.08.2021, 14:46
Comparison of Cash Waqfs of Ottoman Period with Participation Banks

Cash waqfs remained in existence in the market in the Ottoman Empire in a way that they are able to compete with the banks in the western states and prevented the Ottomans from being in severe need of foreign currency until a certain period. In the Ottoman Empire, cash waqfs were established even in the most remote villages and towns, and they did not consider the majority and position of the people. In this context, it is understood that the state and the people acted in a conscious way and worked diligently to provide the necessary support to the people in need of help without discrimination of religion, language, and race.

We can list the contributions of cash waqfs to the Ottoman Empire in general as follows:

  •  In terms of economy, they lightened the burden of the state from time to time.
  •  By providing facilities in the tax payments of the tradesmen, they both prevented the tradesmen from going into debt and prevented the state from being deprived of tax revenue.
  •  Agriculture-supported funds were given and thus, they became the cog in the functioning of production and reduced dependence on foreign sources in terms of production.
  •  They provided support to the structures used by the society and became a direct financer in the construction of some of them.
  •  Cash supports were provided to orphans, the elderly, widowed, and poor people in the society. They attempted to reduce the income disparity among individuals in society.
  • Those who experienced financial difficulties among the Janissaries were supported.

When cash waqfs and participation banks are compared in theory, it is seen that both types of institutions work with the principle of interest-free finance, and this has a nature of a mission. However, the difference in this context is that the cash waqfs make transactions on a voluntary basis, based on their names and operation, while participation banks carry out their commercial activities under the principle of interest-free finance. Even though their positions are similar in terms of concept and period, they are not that similar to each other in theory.

According to Korkut and Bulut (2017), the management in cash waqfs is called with the name of "the founder itself or the trustee". Here, despite the management is left to the individual itself, this does not refer to a process that took place completely outside the state administration. On the contrary, the state acted in a sensitive manner towards this issue and intervened in those who had problems in the management of some waqfs.

Cash waqfs were managed by a trustee or board of trustees within the framework of the Shari'ah principles. This board or person varied according to the size of the waqf. Some waqfs were small and all their transactions were performed by a single person. In medium and large-sized waqfs, management was carried out by a board. The mentioned transactions were matters such as payment of salaries to the staff of the waqf in case the waqf was large, meeting the basic needs of the waqf, and management of the waqf's capital. In the event of the disruption of these transactions, this issue was regarded that the management of the waqf did not perform this transaction correctly and the state or kadi could dismiss the board or trustee in question, and replace it with another board or trustee. (Çiftçi, 2004: p. 81-85).

On the contrary, participation banks are divided into units as the general assembly, board of directors, supervisory board, general directorate, regional directorates, and branches under the framework of modern banking. The aim here is to divide the work into levels and to provide a one-to-one connection with society. Regional directorates are the immediate sub-level of the general directorate in terms of the size of the transaction. In branches, they look at the transactions above the limit or transaction authorization frame allocated for the branch and take decisions.

Fund allocation methods of cash waqfs were basically as follows: Murabahah, Mudarabah, Bida'a.

The functioning of these methods is briefly discussed below:

  • - Murabahah is the profitable sale of the commodity to be traded taken from a person or institution to another person or institution by declaring the cost.
  • - Mudarabah is a fund allocation system in which work and capital are put forward by the parties and the profit is shared.
  • - In Bida'a, people who are parties to a contract besides the waqf do this work for charity. The commodity subject to trade is the property of the waqf.

In addition to these fund allocation methods, waqfs are divided into sub-sections such as avarız waqfs, orphans' funds, safe deposit boxes, and artisans' funds in order to provide better service to the public and to separate the accounts by levels.

We can tell that the situation in participation banks is the expanded, modernized and detailed version of cash waqfs. The methods used have preserved their essence, meaning that sensitivity has been shown in terms of interest but this issue has also been adapted to the conditions of today. These methods are briefly as follows: Mudarabah, Icare, Tawarruq, Salam, Muzara'ah and Muskat, Istisna', Sukuk, Qard Hasan.

The structure of the mudarabah and murabahah is almost the same as the structure in the cash waqfs. When the common aspects of participation banks and cash waqfs in providing funds are considered, the following results are reached:

  • The aim of both institutions is to perform transactions on the principle of interest-free finance.
  • Cash waqfs can be called the participation banks of the period within the framework of these allocation methods.
  • Participation banks use the methods used in cash waqfs as modernized and adapted to today's conditions.
  • As a difference, the purpose of cash waqfs was aid, which is the main purpose of a foundation, then state support and finally commercial activities. In participation banks, on the other hand, the aim is to carry out commercial activities with the principle of interest-free finance. Whereas, aid is also available in participation banks, but it is not the main activity of this system. 


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