Finance in the Ottoman Empire, 1453–1854

(This text was formed from article of P. Sevket. It just includes some specific information from the article. That's why, it doesn't include the complete article.)

The Ottoman Empire was a crossroads of intercontinental trade. The early Ottoman enterprise was not a religious state in the making, but rather a pragmatic one. The Ottoman government secured the pilgrimage routes and tried to make the pilgrims' money transactions easier. After than, Islamic State features had been occuring day by day. The prohibition of interest in Islam prevented the development of credit because, while the practice of riba, the Arabic term for usury and interest, is sharply denounced in a number of passages in the Qur’an and in all subsequent Islamic religious writings. 

During the heated debate about interest rate, Ebusuud Efendi, the prominent, state appointed religious leader (Seyhulislam) of the period, defended the practice from a purely practical point of view arguing that abolition of interest taking would lead to the collapse of many pious foundations, a situation that would harm the Muslim community. However, Annual rates of interest ranged from 10 to 20%. New trading systems were produced. These included a variety of business partnership forms such as mudaraba or commenda, credit arrangements, transfers of debt and letters of credit, all of which were sanctioned by religious 

theory.

 

In the Ottoman monetary system, there existed three levels of coinage, gold, silver and copper. The silver (akce) until the middle of the seventeenth century and the silver kurush (from groschen; also known as the piaster) in the eighteenth century was the basic unit of account and the leading means of payment in local transactions. Also, It started to include foreign currency. Government policies towards foreign coinage provide another example of flexibility. From the earliest days, the authorities encouraged the circulation of foreign coinage and accepted them as payment.The government also exempted precious metals and foreign currency from import duties.

From the 1770s until the 1840s, the Ottoman state finances frequently experienced large budget deficits. These deficits reached their peak during the 1820s and 1830s. Because they couldn’t take credit. Bimetallism was adopted. Bimetallism is a monetary standard in 

which the value of the monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed rate of exchange between them. It was used to achieve greater price stability by the Government. 

After the Ottomans decided to embrace bimetallism and stable coinage, only one alternative for the finance of budget deficits: external borrowing. While the Jews were not as prominent in money lending and trade as they had been in the sixteenth century, Greeks, and 

especially Armenians, often in partnerships of two, emerged as the leading sarrafs of the capital city. In 1847, with the financial support of the government, Th. Baltazzi, from a prominent family of financiers and J. Alleon, a member of a French banking family that had 

settled in Turkey during the French Revolution, finally founded Banque de Constantinople, the first bank of the Galata bankers.