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Munich Personal RePEc Archive

A Comparison between Ottoman CashWaqfs (CWs) and Participation Banksand Modern Interest-free FinancialInstitutions

Bulut, Mehmet and Korkut, Cem

Istanbul Sabahattin Zaim University, Ankara Yildirim Beyazit

University, Ankara Center of Thought and Research

25 December 2016

Online at https://mpra.ub.uni-muenchen.de/76009/

MPRA Paper No. 76009, posted 11 Jan 2017 14:27 UTC

AComparisonbetweenOttomanCashWaqfs(CWs)and

ParticipationBanksandModernInterest-freeFinancialInstitutions

Prof.MehmetBulut,IstanbulSabahattinZaimUniversity

PhDCandidateCemKorkut,AnkaraYildirimBeyazitUniversity

Abstract

The Ottoman State is accepted the civilization of waqf so that the borrowing of

people who needed cash was provided by waqfs that had cash as capital. These

waqfsoperatedtheircapitalswithinthe limitsthatweredrawnbyOttomanulema

undertheeffectsofinterestbaninIslamicstates.Thesewaqfscanbethoughtofas

thepioneersofmodernIslamicfinancialinstitutions.TheCWsbecamethefactorof

stability in the Ottoman financial system with controlling high usury rates and

determiningthemarketinterestrate.

Today, the participation banks as interest-free financial institutions fulfill this

function. The participation banks that bring together the people who want to

borrowmoneywithoutinterestandthepeoplewhowanttooperatehiscapitalwith

halal ways are separated from cash waqfs in some respects. In this study, even

though they follow similar financialmethods, thedifference in their purposes and

othercharacteristicsof interest-free financial institutionsandtheirpioneerofCWs

willbeexamined.

Keywords: Ottoman State, cash waqfs, interest-free financial institutions,

participationbanks,Islamicfinance

JELCodes:G20,G23,N20,N25

Introduction

Waqfshavea functionofnotonlycooperationandsolidarity insocietybutalsoof

economicandfinancialaspects.Waqfsmakethesolidarityasan institutionalform.

Islampaysparticularattentiontotheestablishmentofwaqf.Muslimswhowantto

fulfillthecommandmentofAllah1haveestablishedalotofwaqfsforthispurpose.A

Waqf is the allocationof anownedproperty or an economic value to a particular

social need in the community. The goods that are devoted, lose their feature of

private ownership. Thereafter, they are allocated to the benefit and service for

people(Özcan,2008:144).ItispossibletotakethewaqfapplicationstotheProphet

period in Islamic history. Thehadith thatwas transmittedby SahihMuslim (1631)

when someone dies, his deeds come to an end except for three: ongoing charity2,

beneficialknowledge,orarighteouschildwhopraysforhimcanbemainmotivation

forestablishingawaqf.Thetermofongoingcharitycanbethoughtofasthesource

of waqfs in Islam (Furat, 2012:66). The first meaning of waqf and its plural form

awqafmeanstostopsomethingorstandstillinArabic,whichderivedfromtheverb

1SurahAliİmran(FamilyofImran)3:92-Neverwillyouattainthegood[reward]untilyouspend[in

thewayofAllah]fromthatwhichyoulove.Andwhateveryouspend-indeed,AllahisKnowingofit.2sadaka-icariyeintheHadith.

waqafa. The other and well-known meanings of waqf are pious and charity

institutions(Çizakça,1998:43).

Thewaqfs that institutionalized fully in theOttoman period, had been the

occasion of knowing Ottoman as the civilization of waqfs. Waqfs were generally

organizedbypublicandtheyweretheorganizationsthatincurredoutsidethestate

mechanism.Especially,thesecivilsocietyorganizationslightenedthestate’sburden

on the educational, religious and infrastructure service. Although they were civil

institutions, the organization, the functioning and the management of waqfs

dependedonreligiousfactorssuchasviewsofmujtahid3imams,ulema4,qadi5setc.

andwrittenlawsasregulationsofwaqfs(EvkafNizamnamesi).

WaqfshadmanymissionsintheOttomansociety.Theyblockedthepowerful

stateabouttheinterventionofrighttoproperty.TheywereabletoprotectIslamic

architectural heritage and other constructions such as mosques, masjid 6 s,

waterways, fountains, sidewalks etc. by way of financing them. They also helped

people as an insurance system by paying their taxes in the depression times. In

addition, due to the provision of waqf irrevocability, they prevented the

disintegration of fertile agricultural lands caused by the Islamic inheritance law.

Furthermore,theymadeakindofsocialsecuritysystemfunctionbygivingpensions

totheelderlyordisabledpeople.Theymadeinsurancepaymentstoartisansetc.for

damagesfromfire,disasteretc.Thesefunctionsshowthatwaqfsformedaprimitive

socialsecuritysystem(Korkut,2014).

Inthisstudy,akindofwaqfs,cashwaqfs,willbeexaminedespeciallyinthe

economic context. It is thought that some of the methods used in CWs are the

pioneersofmodernIslamic(interest-free)financialinstruments.Inthefirstpart,the

CWs will be examined with discussions, establishment process, operations and

effectsofCWsontheeconomicandsociallifeofsociety.Moreover,threeCWsalso

will be investigated in detail from the primary sources, waqfiyah7s. A short

comparisonbetweenthesethreeCWswillalsobemade.Themodern interest-free

financialinstitutionswillbethefocusofthesecondpartofthestudy.Thehistoryof

these institutions and modern interest-free financial instruments also will be

summarized in this part. In addition, the social and economic effects of these

institutions are examinedand summarized in a figure.A comparisonwill bemade

under26 issues in thirdpartof thestudy. Inconclusion, the requirementsofboth

these institutions will be questioned. Moreover, the contributions and effects of

CWs to the system will be highlighted, whether there are any legal barriers,

especiallyinTurkey,fortheestablishmentofCWstoday.

I.CashWaqfs(CWs)

CWs are thewaqfs that their entire or a portion of capitalwas formedwith cash

money.ThecashmoneywasoperatedundertheIslamicrulesandtheincomethat

camefromthecapitalwasusedforthepurposesofwaqf liketherental incomeof

realestatewaqfs.ThemethodsofoperatingthecashmoneyinCWsarethebasisof

3Amujtahidisascholarwhoisqualifiedandauthorizedtomakeijtihad.

4UlemaisthepluralformofalimwhocanbedefinedasascholarinIslamicaspects.

5QadiisajudgewhoappliestheIslamiclawincourt.

6Masjidcanbedefinedasasmallmosque.

7Charterofendowment

themethods implementedbycontemporary interest-freefinancial institutions.The

methods, istirbah, istiğlal, irbah etc. in waqfiyahs and mudarabah, murabahah,

bidaʻa etc. –the definitions of these methods will be explained later- are in

jurisprudence registers have been used to adapt to present conditions by Islamic

financialinstitutions.

Döndüren(1998:64)saysthattheCWshadstartedtodevelopsincethe13th

century.Ontheotherhand,inregisters,wecanseethatthefirstCWwasfounded

by Yağcı Hacı Muslihiddin in 1423 at Edirne Province (Mandaville, 1979:290). He

donatedsomeshopsand10.0

00 akche8s for the expenditures of a mosque. The lending rate was 10

percentannuallybecausetheexpectedincomefromcashcapitalwasequalto1.000

akchesforoneyear.Again,oneofthefirstexamplesofCWwasBalabanPashaWaqf

founded in 1442 at Edirne Province. This big waqf was established for a school

construction.Hedevotedfourshops,ahammam9and30.000akchesforthewages

ofmuderris/lecturers and other expenditures of school. The operation rate was

determined as 10 percent annually (Mandaville, 1979:290). Ottoman Sultans also

foundedCWs.OneofthemwasestablishedbySultanMehmedIItheConquerorin

1481.Hedevoted24.000gold Sultâni10formeeting themeatneedsof Janissaries.

ThesecondexamplewasfoundedbySuleimantheMagnificentin1566.Hedevoted

some amount of money and combined the CWs that are founded for the same

purpose. This CW had 698.000 akches capital for the meat needs of butchers in

Istanbul(Döndüren,1998:64).

TheseinstitutionsaretheindicativeofthepragmatismofOttomaneconomic

mentality. The CWs were able to stay unaffected by the financial and economic

developments inEurope for longyears (Pamuk,2004:233).Thus, they represented

the Ottoman economic mentality against to the European mercantilist economic

view.TheCWs thatbothmadecharitiesand responded to theeconomicneedsof

societyaresounique.Despiteall thebenefitsandconveniencesprovidedbyCWs,

Ottoman scholars did not hesitate to discuss these institutions. The following

chapterwillexaminethediscussionsonCWs.

I.IDiscussionsonCWs

OttomansgavetheCWstotheIslamiccivilization,thustheseareuniqueinstitutions.

Because, the Ottomans were Hanafi, the views of major Hanafi scholars must be

examinedwelltounderstandthereligiousgroundsofCWs.Thus,opinionsofImam

AbuHanifa,hisstudentsImamMuhammadal-Shaybani,ImamAbuYusufandImam

ZuferhadbeenthebasicpremiseoftheOttomanscholars.

ThefounderofHanafisect,ImamAbuHanifawasamerchant,sothatthereis

ahugeliteratureofeconomicaffairsintheHanafisect.AccordingtoAbuHanifa,the

movable assets cannot beused for establishmentofwaqf as capital.However, he

hadviewsonfair tradeandother Islamictradeways likemudarabah, forwardsale

etc.(Sıddıki,1982:5-6).Theseoperationshadbeensomeofthemainoperationsof

CWs. The Imam Abu Yusuf and ImamMuhammed al-Shaybani, students of Imam

8OneofthemainmonetaryunitoftheOttomanState.

9HammamcanbedefinedasTurkishbath.

10ThisclassicalOttomangoldcurrencywasfirstissuedinFatihSultanMehmedperiodandhada3,45

gweight.

Abu Hanifa were called as Imameyn, two imams. The views of Imameyn are

important,becauseifthereisadifferenceofopinionbetweenthemandImamAbu

Hanifa, the opinion of Imameyn is valid. Abu Yusuf opposed to the donation of

movablepropertyaswaqf.Thehorses,weaponsetc.couldbethepropertyofwaqfs

onlyincaseofnecessity.Ontheotherhand,theviewsofImamAbuYusufaboutthe

bindingsituationofwaqfswereusedfortheadoptionandallowanceissuesforCWs.

However, Imam Muhammed al-Shaybani thought that the movable assets and

propertiescouldbeusedasacapitalforestablishingawaqf,because,accordingto

theHanafi thought, thetraditionandcustom institutionhadbecomeaknownand

legalinjunctionforsocietyiftherewasnoconflictwiththebasicpreceptsofIslam.

Alltwoimamshadconcernsaboutthedonationofmovableassets.Theydeveloped

solutionsforthat.Oneofthemwastodonatebothmovableandimmovablegoods

togetheratsametime.Ontheotherhand,ImamZufergavepermissiontousingnot

only movable assets but also cash money as a capital for a waqf. So, the

authorizationofCWsinOttomansdependedonthisopinionofImamZufer.

Ottoman scholars were inevitable to enter into the debate on CWs, even

there were differences about the opinions of Hanafi mujtahid imams. The first

scholar whowrote a short treatise about CWswas Shayk al-Islam Ibn Kemal. Ibn

Kemal supported the establishment of CWs. He claimed that the destruction and

dispersalofrealestatewaqfswereeasierthantheCWs(Özcan,2000:34).IbnKemal

wasoneof thepioneersofulemawhoweresupporting theallowanceofCWs.On

the other hand, there were also scholars who strongly opposed to found CWs. A

formerShaykal-IslamandRumeliaProvinceKazaskerÇivizadeMuhittinEffendiwas

instrumental in forbidding CWs by Sultan between the years 1545-1548 (Gel,

2010:185).Heclaimedthattheviewsofoverahundredscholar’saboutCWswere

obvious and itwasnotpermissible (Özcan, 2003:37). Perhaps themost famousof

Ottoman Shayk al-Islam was Ebussuud Effendi. He had made this task for nearly

thirty years. He had provided a good accordance between Islamic law and the

traditional law forOttoman society (Okur, 2005:40).He thought theoperationsof

cashmoney in CWs should be under the Islamic rules and far from the doubt of

interest. He also claimed the lending rate of CWs cannot bemore than the legal

ribh11rate. This posture of Ebussuud Effendi and his efficiency in administration

provided a financialmarket thatwas easy to control andpreventedusury (Akdağ,

1979:256). Against to Ebussuud, Imam Birgivi, another important person in the

Ottomanscholarclass,thoughtthattherewasaseriousinterestriskinoperationsof

CWs.Healsoclaimedthatthepeoplewhobelievedtofulfilltheirzakatworshipby

CWs were at risk because the CWs were not saheeh12. He also thought that the

transactions were also problematic from an Islamic perspective (Önder, 2006). A

Khalwati Sheikh Bali Effendi was another scholar who believed in the benefits of

CWs. He sent letters to Sultan and ÇivizadeMuhittin Effendi when the CWs was

banned(Şimşek,1985:211).HeemphasizedtherequirementandimportanceofCWs

forsociety.Healsoreportedthenegativeeffectsofthebanonsocialandeconomic

life(Özcan,1999).

11Ribhmeansprofit.

12SaheehmeanstrustworthyandauthenticinIslam

The views of mujtahid imams and Ottoman ulema are important in

understandingtheplaceandimportanceofCWsfortheMuslimsociety.Because,if

thereisnoapprovalofthemdespitetheconflicts,theycannotbewidespread.

I.IITheEstablishmentProcessofCWs

TheprocessoffoundingaCWwastookplaceundertheregulationsofIslamicfiqh13.

TheUlemahaddeveloped somemethods formakingCWs legal. The conditionsof

occurrence, validity, gaining force and cohesiveness have to be essential for the

validityofacts(Kudat,2015:63).Becauseofthat,thewaqfswerefoundedinsome

stages.

Theprocesshadbegunwiththedonationofcashascapitalaccordingtothe

views of Imam Zufer. On the other hand, the processwas corrupted because the

conditionsofvalidityandcohesivenessdidnothold.Then,thefounderofwaqfgave

uptoestablishtheCWandthetrustee14opposedtofounderandthecasewentto

court. The trustee defended himself as follows. The Imameyn said that the

conditionsofvalidityandcohesivenesscannotbedissociated.Moreover,ImamZufer

alsogavepermission toCWs.Theqadiaccepted theargumentsof the trusteeand

foundtheestablishmentofCWconvenient(Kudat,2015:67).

The Ottoman scholars and judges ruled by giving importance to public

interest.So, theOttoman lawsystemwasvery flexibleandpragmatist to take fast

and efficient results. In this case, they knew that the CWswere quitewidespread

eventhefarthestvillagesandregions.ThesocialandeconomicaspectsofCWsalso

affectedthedecisionsofjudges.

I.IIIOperationsofCWs

TheinterestwasprohibitedindivinereligionswithBuddhism,Hinduismetc.InIslam,

ribaandinterestareusedforsamemeanings.Theribaisdefinedasoneoftheworst

sins.Ontheotherhand,therearesomescholarswhoclaimthatinterestcanbeused

ifandonly ifthere isaseriousobligation(Rahman,2010:53-54).However,theban

oninterestisobviousinQur’an15.Thus,oneofthemaindiscussionsaboutCWshad

beentheinterestissue.

ThetrusteesofCWsoperatedthecashcapitalinmanymethodsbytryingto

avoid the interest risk. In waqfiyahs, these efforts can be seen in the terms of

13FiqhmeansIslamicjurisprudence.

14Trusteereferstothemütevelliindocuments.

15Surah Al-Baqarah (The Cow) 2:216 - Those who consume interest cannot stand [on the Day of

Resurrection]exceptasonestandswhoisbeingbeatenbySatanintoinsanity.Thatisbecausethey

say,Tradeis[just]likeinterest.ButAllahhaspermittedtradeandhasforbiddeninterest.Sowhoever

hasreceivedanadmonitionfromhisLordanddesistsmayhavewhatispast,andhisaffairrestswith

Allah.Butwhoever returns to [dealing in interestorusury] - thoseare thecompanionsof theFire;

theywillabideeternallytherein.

SurahAliİmran(FamilyofImran)3:130-Oyouwhohavebelieved,donotconsumeusury,doubled

andmultiplied,butfearAllahthatyoumaybesuccessful.

SurahAn-Nisa(TheWomen)4:160-161-ForwrongdoingonthepartoftheJews,Wemadeunlawful

forthem[certain]goodfoodswhichhadbeenlawfultothem,andfortheiravertingfromthewayof

Allahmany[people].And[for]theirtakingofusurywhiletheyhadbeenforbiddenfromit,andtheir

consumingofthepeople’swealthunjustly.Andwehavepreparedforthedisbelieversamongthema

painfulpunishment.

istirbah, istiglal, irbah, idane etc.Moreover, the lending rates are alsowritten on

somewaqfiyahs.Çam(2014:40)extractedeightmethodsusedformoneyoperations

at CWs in his study: (1)Qard, (2)Mudarabah, (3) Bidaʻa, (4)Murabahah, (5) Beyʻi

istiglal,(6)Buyforrenting,(7)OperationsatAwqafMinistry,(8)IstirbahatMilitary

Court.

The lending rate of CWswas generally between 10-15 percent16. It is seen

obviously,thisratedecreasedinthelastdecadesofthe20thcentury17.Thisdecrease

inlendingratecouldbeexplainedbytheincreaseinaccessibilityofcreditbybanks.

Thecommonmethodsweremurabahahandbeyʻiistiglal.

In qard, people who used the loan from CW should only give the same

amountofmoneywhenthematuritycame.Mudarabahistheclassicallabor-capital

partnership.TheentrepreneurputshislaborandtheCWgivesthecapital.Theprofit

is sharedwith the rates that theyhavedeterminedbefore. The artisan, farmeror

merchant,theentrepreneur,gavethewaqftheborrowedmoneyandallprofitinthe

methodofbidaʻa.Theentrepreneurcouldfindthechancetoimprovethevolumeof

hisworkswiththemoneythatwasborrowedfromtheCW.Heputhislaborandhe

alsocontributedtothecharityworkinthisway.Thewaqfbuysthegoodsorservices

thatareneededbytheentrepreneursandsellsittothemwithprofitinmurabahah.

Mudarabah term is located in severalwaqfiyahs18. Istiglalwas theother common

methodforCWs.Theentrepreneurwhoneedscashsellshishouseoretc.totheCW.

TheCWbuys it cash and sells it again to the entrepreneurwith amaturity or the

entrepreneur can be the tenant in this house until he will buy it again. The

discussions about interest are welded from this method (Çizakça, 2004:10). The

trusteesometimesboughtrealestatewiththecapitalofCWandtherentalincome

wasusedforthepurposesofCW.However,thecashprovidedflexibilitytotheCWs.

Inaddition,theincomefromtheoperationsofmoneywiththemethodsofCWswas

generallyhigherthantherentalincome.

Thesemethods can be divided into three parts. The firstmethod provided

gainforboththewaqfandtheborrower.Thesemethodsweremudabahah,bidaʻa,

murabahahandbeyʻiistiglal.Theotherwasqard.Inqard,theborrowerwastheonly

recipientofthebenefit.Thelastmethodwasonlyusedforobtainingbenefitswaqf.

Thesecanbe summarizedasbuying for renting,operationsatAwqafMinistryand

istirbahatMilitaryCourt.

I.IVTheEffectsofCWsonEconomyandSociety

The CWs played a crucial role in social life like other waqfs. Moreover, their

economic impacts could be observed better. These waqfs had become financing

sources of theOttoman entrepreneurs,merchants and craftsmen for a long time.

TheborrowingcostofCWwasdeterminedbythewaqfiyah.Thus,theydetermined

thecostofborrowingwith theirappliedprofitandoperation rates in the financial

16These rates are taken from almost 800waqfs documents that are investigated in the Project of

Inspection and Analysis of Rumelia CashWaqf, supported by the Central Bank of the Republic of

TurkeyandYunusEmreFoundationconductedbyAnkaraCenterofThoughtandResearch(ADAM).17The rates are taken fromTheArchiveof T.R. PrimeMinistryDirectorateGeneralof Foundations.

Themaincauseofthisdecrease istheMurabahaLawissuedin1887G./1303H.whichrestrictedthe

maximumprofitratewith9%.18RodoscukShariaCourtRegisters:08454.00051v.59/b

system.Theyalsoreducednegativeeffectsofusurersinthemarketforpeoplewho

needed cash. In addition, CWs also provided financial stability with their

predetermined operation rates and due to the spread of them even the furthest

villagesandregionsofthestate.

TheCWsalsoprovidedparticipationofpeoplewhohavethesmallestsavings

intothecharityservices19.Moreover,accordingtothe Islam20andothersocialand

economic factors, the collection of the great fortune in certain persons was

preventedbythestateinOttomansasthepreviousIslamiccivilizations(İA,v32:65-

68). So, the large capitals were collected in waqfs21. However, the fundamental

purpose of thesewaqfswas charity, they did not have an aim about takingmore

profitfromborrowersorothermaterialbenefits.TheeconomicmentalityofCWsis

Islamicandcanbesummarizedasthetaskoftheeconomyistoimprovethewelfare

of the people not as the view of capitalist economic system human is for the

economy(Tabakoğlu,2012:192).

It is observed that the CWs ensured most of the public services that are

currently funded by the state. The madrasas22, schools23etc. as the educational

services,themosques24,masjids25,lodges26,zawiya27s28etc.asreligiousservices,the

caravanserais29, inns30as security and trade services, the sidewalks31, fountains32

19WaqfofHadjiAhmedEffendib.HüseyinEffendiandHisCompanions -TheArchiveofT.R.Prime

MinistryDirectorateGeneralofFoundations,RegisterNo:987,PageNo:101-102,SerialNo:35-120SurahAl-Hashr(TheExile)59:7-AndwhatAllahrestoredtoHisMessengerfromthepeopleofthe

towns - it is for Allah and for the Messenger and for [his] near relatives and orphans and the

[stranded] traveler -so that itwillnotbeaperpetualdistributionamongthe rich fromamongyou.

AndwhatevertheMessengerhasgivenyou-take;andwhathehasforbiddenyou-refrainfrom.And

fearAllah;indeed,Allahissevereinpenalty.21Waqf of Gazanfer Bey b. Abdullah - The Archive of T.R. Prime Ministry Directorate General of

Foundations,RegisterNo:2105,PageNo:230-235,SerialNo:148

WaqfofAhmedBeyEffendib.AbdullahBey-TheArchiveofT.R.PrimeMinistryDirectorateGeneral

ofFoundations,RegisterNo:988,PageNo:5,SerialNo:6

Waqf ofMehmed Pasha - The Archive of T.R. PrimeMinistry Directorate General of Foundations,

RegisterNo:633,PageNo:21,SerialNo:1122WaqfofAbdulbaki Pashab. Ebulvefa - TheArchiveof T.R. PrimeMinistryDirectorateGeneral of

Foundations,RegisterNo:632,PageNo:102-108,SerialNo:4323Waqf of Hadji Ali Effendi b.Mustafa - TheArchive of T.R. PrimeMinistryDirectorateGeneral of

Foundations,RegisterNo:632,PageNo:82-83,SerialNo:3624WaqfofHadjiMehmedEffendib.EbubekirEffendi-TheArchiveofT.R.PrimeMinistryDirectorate

GeneralofFoundations,RegisterNo:627,PageNo:21,SerialNo:725WaqfofKaraAhmedAghab.HadjiHasan-TheArchiveofT.R.PrimeMinistryDirectorateGeneral

ofFoundations,RegisterNo:629,PageNo:270-271,SerialNo:24526Waqfof Rufai SheikhMustafa Kabuli b.Ömer– Edirne Sharia Court Registers, RegisterNo: 4955

Page:147(74)27ZawiyacanbedefinedasthereligiousschoolinIslam.Italsocanbethoughtasmonastery.

28Waqf of FatmaHatun bt.Memi Bey - The Archive of T.R. PrimeMinistry Directorate General of

Foundations,RegisterNo:580,PageNo:384,SerialNo:21329Waqf of Hüseyin Çelebi b. Hasan - The Archive of T.R. Prime Ministry Directorate General of

Foundations,RegisterNo:570,PageNo:40-42,SerialNo:1730Waqf of Zülfikar Agha - The Archive of T.R. PrimeMinistry Directorate General of Foundations,

RegisterNo:623,PageNo:183,SerialNo:18931WaqfofMehemdAghab.HüseyinEffendi-TheArchiveofT.R.PrimeMinistryDirectorateGeneral

ofFoundations,RegisterNo:627,PageNo:266,SerialNo:14632WaqfofİsmailPashab.MahmudPasha-TheArchiveofT.R.PrimeMinistryDirectorateGeneralof


waterways33etc. as infrastructure services, hospices, hospitals34, almshouses, soup

houses35etc.associalserviceswerefundedbythewaqfsystem.

I.VSamplesofCW

Inthisstudy,wewill lookattheseveralexamplesofCWsfromTheArchiveofT.R.

Prime Ministry Directorate General of Foundations. Waqfiyahs are important

documents toanalyzetheeconomicsituationof thatera. Itcanbe learnedfroma

sampleCWwaqfiyahthat(1)theaimsoftheCWs,(2)name,title,genderandfamily

of the founder, (3) the place of thewaqf or the region of institution that will be

funded,(4)thename,title,genderandfamilyoftrustee,(5)theamountofmoney

thatwasdonatedandthegoodsiftheyexisted,(6)themethodsofdonatedmoney,

(7)theoperationrateofmoney(theborrowingcostfortheusers),(8)revenuesthat

camefromoperationsandtheexpendituresofrelevantinstitutions,(9)heirsofwaqf

andmanagement,(10)theviewsofHanafimujtahidimams,(11)The181stverse36of

SurahAl-Baqarah,(12)thedateofregistration,(13)thenamesofthejury.

The social and economic life of the society could be understood from the

waqfiyahs.Because,thewagesofvariousoccupations,thepriceofsomeproducts,

theoperation rateetc. are located in thewaqfiyahs.Moreover, theestablishment

processandthelegalbasisofthewaqfarealsolearnedfromthesedocuments.So,

somesamplesofwaqfiyahsareexaminedfromitsprimarysources.

The region of waqfs examined are the Balkans (Rumelia) in the Ottoman

period. The Albenia-Belgrade region includes whole territories between Belgrade

andAlbenia.TheotherwaqfwasfoundedinMisivri(Nesebar),acitylocatedinBlack

SeacoastofBulgaria.

AllthesamplesofwaqfsshowthatCWshadprovidedcreditsformerchants

and entrepreneurs with a low profit-rate. The first sample of CWs supports the

Faroqhi’s (2004) findings about the role of CWs in funding the entrepreneurs in

Bosnia.Thus, the solution tobedrawn is that therewereCWs that supported the

entrepreneurs in theotherpartsof theBalkans.Thus, thereare twotypesofCWs

withtheresultsofÇizakça(2000).ÇizakçaclaimsinhisstudythattheCWspreferred

togiveconsumptioncreditsratherthansupportingtheentrepreneursormerchants

in Bursa. The first one can be defined as risk-lover waqfs that provided the low

profit-rate credit for merchants. On the other hand, the other type is more risk-

averseandgenerallytriedtogiveconsumptioncreditstotherich.Itisanotherissue

to be investigated on which motivations caused different purposes for the CWs

foundedindifferentpartsofOttomans?

33Waqf of Mustafa Effendi b. Hadji Kasım Effendi b. Ali - The Archive of T.R. Prime Ministry

DirectorateGeneralofFoundations,RegisterNo:623,PageNo:338,SerialNo:33934Waqfof SinanPashab.AhmedAgha - TheArchiveof T.R. PrimeMinistryDirectorateGeneral of

Foundations,RegisterNo:734,PageNo:111-116,SerialNo:6635Waqf of Yahya Pasha b. Abdulhay - The Archive of T.R. Prime Ministry Directorate General of

Foundations,RegisterNo:629,PageNo:422-429,SerialNo:33236SurahAl-Baqarah(TheCow)3:181-Thenwhoeveraltersthebequestafterhehasheardit-thesin

isonlyuponthosewhohavealteredit.Indeed,AllahisHearingandKnowing.

I.V.ITheWaqfofAyşeKadınbt.MahmudPasha37

This waqf was founded in Albania-Belgrade, Murad Çelebi Neighborhood at 13

August 1679Gregorian and 6 Rajab 1090Hijri38. She devoted 100.000 akches and

this amountwas equal to 833,33 qurushes as 1 qurushwas equal to 120 akches.

AyşeKadın founded thiswaqfbyproxyof herhusband, SalihBeyb.HasanPasha.

Theoperationrateofthemoneyalsocanbecalledastheborrowingcostrateis15%

(eleven and a half to ten39 ). The method of operation is called as Islamic

transactions40.Therearealsosomeconditionsaboutgivingandusingmoneyasthe

loan.Thesecanbeorderedas (1) thetransactionsmustbehalal, (2) theborrower

mustbeanhonestandhonorablemerchant41,(3)themoneyshouldnotbegivento

insolvent or bankrupt person who are not able to pay his debt42, (4) a strong

guarantor43, (5) a valuablemortgage44. The income of waqf was reserved for the

staff wages and other expenses of a school were built by Ayşe Kadın and her

husbandinthesameneighborhood.Theschoolhadtenrooms,aclassroom,anda

Qur’anlearningcourse.Sheappointedherhusbandasatrusteeforthemanagement

ofthewaqf.Inthelastpartofthewaqfiyah,the181stverseofSurahAl-Baqarah,the

registrationdate,andthenameofthejuryarewritten.

This waqf was founded in the 17th century. The founder and her husband

werethechildrenofthemilitaryclass.ThisclassistherulingclassofOttomans.The

intention of basing the monetary transactions to the halal ways is obvious. The

continuitypurposeofwaqf isalsoevident.Moreover, thiswaqfwasestablishedto

fundsomeeducationalservices.

I.V.IITheWaqfofSalihBeyb.HasanPasha45

Thiswaqfwasfoundedbythehusbandofthefounderofpreviouswaqf,SalihBeyb.

Hasan Pasha. This CW also was founded in Albania-Belgrade, Murad Çelebi

Neighborhood at 13 August 1679 Gregorian and 6 Rajab 1090 Hijri. He devoted

80.000akchesandthisamountwasequalto666,66qurushesas1qurushwasequal

to120akches.Theoperationrateissame,15%andmethodsarewrittenasistirbah

and istiglal.Theotherconditionsof the loanarealmost thesame.But, there isan

extracondition.TheloancouldnotbeusedbystateofficialsasQadis,müderrisetc.

ThepurposeofthisCWandthepreviousoneoverlaps.Thispurposecanbeshown

as an example of supply side capital pooling (Çizakça, 2000:35). This means both

CWswerefundingthesamemadrasahfortheexpensesofmadrasahandwages.The

lastpartcarriesalsosimilaritieswiththepreviousone.

37WaqfofAyşeKadınbt.MahmudPasha-TheArchiveofT.R.PrimeMinistryDirectorateGeneralof

Foundations,RegisterNo:623,PageNo:272,SerialNo:29238HijricalendaristheIslamiccalendaranddependsonthemovementsandphasesoftheMoon.Itis

also described as the lunar calendar. The start of the calendar is emigration of the Prophet from

MeccatoMedina.ThisjourneyisdefinedasHijra.39onuonbirbuçukinthewaqfiyah

40muʻâmele-işerʻiyyeinthewaqfiyah

41istinmâlarındanasâr-ıemânetzâhir-ilehçelerindeenvâr-ıistikāmet-ibâhireolantüccar-ıkaviyve’l-

iktidârinthewaqfiyah42asâr-ısivâdanhazerolunubinwaqfiyah

43kefîl-imelîinthewaqfiyah

44rehn-ikavîinthewaqfiyah

45Waqf of Salih Bey b. Hasan Pasha - The Archive of T.R. Prime Ministry Directorate General of


Thiswaqf is importantbecause theborrower is restrictedwith traders.We

candefinethesetradersasentrepreneurs.Thestateofficialswerenotabletotake

loans fromthisCW.Thus, thesecondaryaimof thiswaqfwashelping thereviving

theeconomybyfinancinginitiatives.

I.V.IIITheWaqfofHasekiMustafaAghab.MehmedAghab.HadjiAhmedAgha46

Thiswaqfwasfounded inMisivriTownat1May1720Gregorianand22Jumada II

1132. The founder donated 55.000 qurushes, 2 houses, 4mills, 1 warehouse and

someotherrealestates.Themainpurposeof thisCWwasalsoto fundamadrasa

that was built by the founder of CW containing ten rooms for scholars, one

classroom,onekitchen,oneguestroomandonebathroom.Theincomeofwaqfwas

formedbytherentalincomesfromrealestatesandtheprofitfromthecashcapital.

TheoperationrateofthisCWisalso15%.Themethodsoftheoperationareordered

as istirbahand istiglal.Therearealsosomeconditionsofthe loan inthewaqfiyah.

The first one is that the borrower must be from the same town or neighboring

towns.TheborrowercanalsobefromİstanbulandBursa.Moreover,theinsolvent

and bankrupt persons, the state officials were not able to use the loan from this

CW47.Theriskofinterestandsinkingisespeciallyemphasizedinthewaqfiyah48.The

purpose of waqf can be ordered as religious services, educational services, trade

funding services and other social services for the society. The heirs of waqfwere

written in detail in waqfiyah. The establishment process of CW is based on

Imameyn49.

This CWwas funding a lot of charityworks.Moreover, it was able to give

loanstotheartisans,farmersandtradersasentrepreneurs.Itwasalsorestrictedto

giving the loanto thestateofficers.Theoperationmethodsarealsomentioned in

thewaqfiyah.Theregionconditiongavethebenefittothewaqftofollowitsloans.

Moreover,thisconditionhasalsoapositiveeffectonregionaldevelopment.

Table1.AComparisonbetweenFeaturesofSamplesofCW

1stCW 2ndCW 3rdCW

Thefounder AyşeKadınbt.

MahmudPasha

SalihBeyb.Hasan

Pasha

HasekiMustafa

Aghab.Mehmed

Aghab.Hadji

AhmedAgha

genderof

founder

female male male

dateof

establishment

13August1679 13August1679 1May1720

Location Albania-Belgrade,

MuradÇelebi

Neighborhood

Albania-Belgrade,

MuradÇelebi

Neighborhood

Bulgaria,Misivri

Town

Capital 100.000akches 80.000akches 55.000qurushes,2

4646WaqfofHasekiMustafaAghab.MehmedAghab.HadjiAhmedAgha-TheArchiveofT.R.Prime

MinistryDirectorateGeneralofFoundations,RegisterNo:623,PageNo:321-325,SerialNo:32847âmilvemîrîmültezimînevemedyûnmüflisevirilmeyeinthewaqfiyah

48ziyâ‘vetevâdanvemuhâlata-iribâdanhazerolunainthewaqfiyah

49İmâmeyn-iHümâmeynmezhebleriüzereamelolunubhilâfındanihtirâzidelerinthewaqfiyah

equalto

833,33qurushes

equalto

666,66qurushes

houses,4mills,1

warehouseand

someotherreal

estates

rateofborrowing

cost

15% 15% 15%

maturityofloan 1year 1year 1year

lendingregion local local local+İstanbuland

Bursa

methodsof

money

transactions

muʻâmele-işerʻiyye istirbahandistiglal istirbah,istiglaland

mudarabah

Purpose funding

educational

services

funding

educationaland

religiousservices

fundingvarious

kindofservices.

II.ModernInterest-FreeFinancialInstitutionsandDevelopments

The modern interest-free financial institutions can be considered as heir of CWs.

TheiroperationslooksimilartoCWs.However,thereisahugetimeintervalbetween

theexpirationofCWsandtheestablishmentoffirstIslamicfinancialinstitutions.The

numberof Islamicbanksandfinancial institutionshasstartedto increasesincethe

1970s and 1980s. These developments could be seen as a back to religion

movements.Theseinstitutionsweredifferentfromtheinstitutionsofbothcapitalist

and socialist economies. Firstly, there were no interest-based operations in these

institutions (Ahmad, 1989:23-24).Moreover, the Islamic economic perspective did

nothaveaconfrontationalapproach.Itdependedonparallelinterestsofpeople,the

privatesector,andthegovernment.

The development process of modern interest-free institutions is

evolutionary. The new products / instruments were discovered by virtue to the

requirements of the time. Despite all the developments, Islamic concerns have

alwaysbeenattheforefrontofoperations,suchasthebanoninterestetc.Thezero-

sumgamesarealsoforbiddeninIslamicfinancialsystem.Inthesegames,oneparty

takesallgainsandtheotherhasnothinglikegambling.Moreover,takingprofitfrom

the uncertainty, gharar is also forbidden (Rethel, 2011:79). We can examine the

principles of interest-free financial system under the six headlines (Tabash and

Dhankar,2014:51-52): (1) the interestban, (2) theprofit-loss (risk)sharingsystem,

(3)theavoidanceofuncertainty(gharar),(4)operationsbasedonShariah&Islamic

rules,(5)therespecttocontracts,(6)themoneyusingasunitofaccount,(7)Zakat.

Table 2. Development Process of Modern Interest-Free Financial Institutions

(Kalaycı,2013:54)

1960-1970 1970-1980 1980-1990 1990-2000 2000-

Institutions Saving

Banks

and

Tradeand

Investment

Banks

and

Special

Finance

Institutions,

Insurance

and

Asset

Management

Companies,

Intermediaries

and

E-Banking

Companies

Products Qard-ı

Hassan

(Beautiful

Loan),

Mudarabah,

Musharakah

and

Salam

and

Commercial

Banking

Products,

Participation

Accounts,

Islamic

Insurance

and

MutualFunds,

IslamicBonds,

Stocks

and

Structured

Financial

Products

Regions Gulfand

Arab

countries

and

Middle

East

and

Asiaandthe

Pacific

countries,

Turkey

Sameregions,

nochange

and

Europe,

USA

Turkey,theheirofOttomansandofcourseCWs,wastoolatetoparticipate

intheinterest-freefinancialsector.Inthisstudy,themoderninterest-freefinancial

institutionsaregenerallydescribedbythetermofparticipationbanks,becausethey

areknownasthisnameinTurkey.Theparticipationbanksalsomaybereferredto

Islamicbanks,startedtheiractivitiesduetoevaluatesavingsofpeoplewhocannot

reflect theirdeposits to theeconomybecauseof interest inTurkey,1985.At first,

they are established under the title of private financial institutions. They changed

their nameasparticipationbanksbecauseof identity and recognitionproblems in

theworldmarketandbegantooperateinthesamemarketofothertraditionalbank

market(ArasandÖztürk,2011:170).

Thedevelopmentprocessofparticipationbanking inTurkeycanbedivided

into three periods. These founded institutions had the task of the introduction of

Islamic banking in the first period. They gave discarded funds by collecting the

depositsthatwerenotevaluatedinthemarketbecauseofinterestfrompeoplewho

haveIslamicsensitivities.Theparticipationbankshadrealizedarapidgrowthinthis

period. The second period started with the establishment of Special Finance

InstitutionsAssociationin2001.Thegoodgoverningat2001crisisprovidedtherise

oftheparticipationbankinginTurkey.Thesystemtookthenameoftheparticipation

banking and the participation banks emphasized that this system is not an

alternativetotraditionalbanking,butitiscomplementarytothesysteminthethird

period.Thismeansthatthebalancesheetsofparticipationbanksanddepositbanks

are asymmetric to each other (Bilir, 2010). However, the current financial

developmentsaretheindicationofbeingaseriousalternativetotheinterest-based

financialsystem.

The first Islamic Finance Institutions in Turkey are Albaraka Türk Special

Finance Institution (established in 1985), Faysal Finance Institution (established in

1985),KuveytTürkAwqafFinance Institution(established in1989),AnadoluFinans

Finance Institution (established in 1991), İhlas Finance Institution (established in

1995)andAsyaFinanceInstitution(establishedin1996).

Now,therearefiveparticipationbanksinTurkey.Theyare(1)AlbarakaTürk,

(2)KuveytTürk, (3)TürkiyeFinansParticipationBank, (4),ZiraatParticipationBank

and (5) Vakıf Participation Bank (tkbb.org.tr). Here, Vakıf Participation Bank,

established in2016, is important,becausethecapital,805.000.000TL,ofthisbank

formedbyT.R.PrimeMinistryDirectorateGeneralofFoundations,WaqfofBayezid

II, Waqf of Mahmut I, Waqf of Mahmut II and Waqf of Murat Pasha

(vakifkatilim.com.tr). Thus, the expectation of social benefits is high from Vakıf

ParticipationBanks.

II.ITheOperationsandProductsofModernInterest-FreeFinancialInstitutions

Modern interest-free financial institutions regulate and arrange the banking

operations and transactions coincide with Islamic scholars, fuqaha. The main

methods that are usually used by interest-free institutions can be ordered as

mudarabah,musharakah,murabahah,ijarah.Thesemethodsdonotgenerateprofit

orlossoverthenominaloperations.Thus,moderninterest-freefinancialinstitutions,

participation banks, finance the real economic activities such as production and

trade or perform these activities directly. Then, they share the profit or losswith

theircostumersasaresultoftheseactivities(Tunç,2010:113).

Mudarabahisalabor-capitalpartnership.Inthismethod,theIslamicfinance

institutionsgiveallcashmoneyascapitalforaninvestmentandthecustomergives

labor.Theprofitissharedbetweentheinstitutionandclientwiththeinitialratethat

theyagreedbefore.Thecapitalownermeetsallcostifalossoccurs.Thissystemis

usually used in financing trade. In the musharakah method, the Islamic finance

institutions cover required capital for a project. The client also contributes to this

capital.Theinstitutionandtheclientsharetheprofitaccordingtotheinitiallyagreed

rates. This ratedoesnothave tobeequal to the capital share.Because the client

does not contribute only capital but also labor. Hence, the client can take more

share from the profit. If a loss occurs, the partners share this according to the

shareholding. The client can alsomake additional payments periodically for taking

the entire project. Musharakah is generally used for funding industry sector.

MurabahahisanotherIslamicfinancemethodthatisthemostfrequentlyused.This

methodisaspotcontractsaleandcalculatedbycostplusprofitmarginformula.The

Islamicfinanceinstitutionbuysthegoodsthataredemandedbytheclientandsellit

totheclientbyaddingamaturityrate.Inthissystem,thecostumerhasknowledge

about the cash price of goods and the profit share thatwill be paid to the bank.

Murabahahplaysanimportantroleinfinancingmicroandsmall-sizedenterprisesby

giving the ability to use short-term and medium-term commercial loans to

households and businesses. This is also well-known in history, because the

applicationofmurabahah is veryeasy. Ijara canbedefinedas leasing. The Islamic

financeinstitutionsprovideresourcestorealestate,realassets(machineryetc.)for

the customerwithahire-purchasemethod.The institutionbuys the realestateor

realassetsandgivespermissiontothecustomerusing it foranagreedperiodand

rent.

II.II The Effects of Modern Interest-Free Financial Institutions on Economy and

Society

Theseinterest-freeinstitutionshadtheopportunitytocollectthedepositsofpeople

who have high Islamic sensitivities and avoid from interest risk. Thanks to these

institutions, the deposits that belong toMuslims that are not used in themarket,

could be operated under the Islamic rules. In a global perspective, interest-free

financial institutions also provided that the Muslim countries, especially whose

economiesdependonoil,obtainedhighoilrevenues inthe1970s.However,there

were not any Islamic financial institution to collect and operate. The Western

countries took benefits of these revenues more than Muslims (Kalaycı, 2013:61).

Thus, interest-free financial institutions ensured to stay oil revenues inside. In

addition, high accumulation of revenues also provided economic development in

thesecountries.

Interest-free financial institutions reduced the negative effects of the

conventionalfinancialsystem.Forexample, itchangesalltherelationshipbetween

borrowerand lender.Therisk is sharedasymmetrically in theconventional system

and the lenderalwaysenlarges its capital. In Islamic finance, if themoney isgiven

directly, the lender has to want it back without interest, Qard-ı Hassan (Rethel,

2011:80).Therefore, Islamicfinancedoesnotallowtheunfaircapitalaccumulation

ofthecapitalowners.Thus,ittriestoequalizethedistributionoftheincome.

TheIslamicfinancialsystemwillalsopreventthelargegapbetweenthebank

assets and liabilities. The gap causes the financial instability. In the interest-free

system,thereisnofreemoneythatcausesthecrisis.Thenominalvalueofliabilities

is equal to the assets in Islamic financial system. Thus, the banks and financial

institutions must be more selective to fund the people or investments (Chapra,

1988:6-7).Theself-controlofthebanksmeansahealthyfinancialsystem.

Figure1.TheEffectsofModernInterest-freeInstitutionsonEconomy

III.AComparisonBetweenCWsandModernInterest-FreeFinancialInstitutions

The fundamental principle of participation banks depends on profit-loss sharing

withoutinterest.AccordingtoIslamiceconomicview,moneyshouldnotbeusedfor

interest-freefinancialsystem

itismoreefficientandmorefair

theinterest-freesystemismorestableanddoesnotcreatecrisis

theethicproblemsislessinthissystem,theprofitfromuncertainityisforbidden

thereisstrongfightagainsttopovertywithzakat,sadaqah

etc.

accumulation50. Itcanbeusedforthemediumofexchangeandunitofaccount. In

thisregard,participationbanksshouldoperatewiththeaimsofprofit-losssharing,

financing production and trade activities and taking profit from them without

interest-basedoperation.Theydonotonlyaimtheeconomicdevelopmentbutalso

socialdevelopment(Eskici,2007:5).TheaimofsocialdevelopmentmakesCWsand

participationbankspartnerinstitutions.

The modern sale-and-lease back application is one of the most preferred

methods due to the low transaction costs in both CWs andmodern interest-free

financialinstitutions.ItwasusedwiththeistiglalterminCWs51.

The 26 basic features of CWs andmodern interest-free institutionswill be

comparedinthefollowingtable.

Table 3. Differences and Similarities between CWs and Modern Interest-free

Institutions

CashWaqfs ModernInterest-free

FinancialInstitutions(for

Turkey)

Guide religiousfactors,Quran religiousandeconomic

factors

emergenceandspread OttomanState GulfandArabCountries,

AsiaandthePacific

Countries

religiousandlegalbasics (1)Quran,Sunnah,Ijma,

Qiyas,

(2)RegulationsofWaqfs

(EvkafNizamnamesi

(1)Islam,

(2)TheBankingrules

Founder naturalpersons naturalorlegalpersons

foundingdocument Waqfiyah companymainagreement

Theprincipleof

operations

locatedinwaqfiyahand

theoperationsdonotgo

beyondthewaqfiyah

operationsareregulated

bytherulesofbanking

andcompanymain

agreement

competition thereisnocompetition

betweenCWs

thereiscompetitionwith

bothparticipationbanks

andtheconventional

banks

mostcommon

operations

(1)Qard,

(2)Mudarabah,

(3)Bidaa,

(1)Murabahah(42.4%),

(2)commodityMurabahah

/Tawwaruq(15.6%),

50SurahAl-Humazah(TheTraducer)104:1-4-Woetoeveryscornerandmocker.Whocollectswealth

and[continuously]countsit.Hethinksthathiswealthwillmakehimimmortal.No!Hewillsurelybe

thrownintotheCrusher[fireofAllah].51“…Zikrolunanmâl-ımevsûf-ımezkûrvemeblağ-ımevkūf-ımezbûrsenedeonuonbirbuçukziyâde

olmak üzere reyb ve riyâdan ârî ve sıhhat ve şerâiti cârî alâ-vechi’l-helâl ve tarîki’l-istiğlâl yed-i

mütevellî-i vakf ile rehn-i kavî ve kefîl-imelî veya ikisinden biriyle i‘mâl ve istirbâhında…”Waqf of

ShoemakerHadjiMehmedEffendib.EbubekirEffendi-TheArchiveofT.R.PrimeMinistryDirectorate

GeneralofFoundations,RegisterNo:627,PageNo:21,SerialNo:7

(4)Murabahah,

(5)Bey’iistiglal,

(6)Buyforrenting,

(7)OperationsatAwqaf

Ministry,

(8)IstirbahatMilitary

Court.

(3)Ijarah/Ijarah

MuntahiaBittamlik

(14.8%),

(4)BayʻBithamanAjil

(13.6%),

(5)Salam(7.9%)(IFSB,

2016)

Aim generally,forfinancing

mosques,masjids,

madrasas,lodgesand

othercharityworks

takingprofitfrom

operations

profitdistribution accordingtothepurpose

ofthewaqf

(1)expensesofmosques,

madrasasetc.

(2)givingsalariesthestaff

ofmosques,madrasasetc.

(3)givingsalariesthestaff

ofwaqf

(4)helpingpoor

accordingtothecompany

mainagreement

(1)investors

(2)personnel

(3)sometimescharity

works

Priorities(inorder) (1)socialdevelopment

(2)economicdevelopment

(1)economicdevelopment

(2)socialdevelopment52

capitalanditsamount cashmoneyfromdirector

bequest,eventhesmallest

savings

minimum30.000.000TL

approvalauthority approvalofQadibasedon

religiousprinciples

approvalofBanking

Regulationand

SupervisionAgency

waysofminimizingthe

risks

Islamicethic,reliable

guarantororstrong

mortgage

Islamicethic,mortgagefor

realestates,insurance,

bail

Theyieldofcapital definedinwaqfiyahsand

generallybetween10%-

15%

determinedbythe

operationofthebankand

economicdevelopments

impactondevelopment generallyregional generallynational

Audit theinternalauditbythe

nazır(observers)declared

inwaqfiyah

theexternalauditbyQadi

theinternalauditbybank

examiners

theexternalauditby

BankingRegulationand

SupervisionAgency,

52

• SocialResponsibilityProjectsofKuveytTürkParticipationBank:

o http://www.kuveytturk.com.tr/social_responsibility_projects.aspx

• EthicalPrinciplesofAlbarakaTürkParticipationBank:

o http://en.albarakaturk.com.tr/investor_relations/detail.aspx?SectionID=3yxZnyldt7

BhdmdvQL%2bLDg%3d%3d&ContentID=Gq550BfHYdLNp9Facz%2bB5w%3d%3d

independentauditfirms,

TheCentralBankofthe

RepublicofTurkeyand

otherinstitutions

management (1)usuallyallthepowers

areconcentratedin

trusteeforMülhakand

Müstesnawaqfs,

(2)MinistryofWaqfs/

FoundationsforMazbut

waqfs

(1)boardofdirectors,

(2)supremecouncils,

(3)auditcommittee,

(4)advisoryboard

Liabilities donationorbequest

(Islamic-based)

externalfunds,savingsof

clients

Assets Islamicfinancial

Instruments

Islamicfinancial

Instruments

fundstransfer cashandsometimesgood generally,cashgiven

debtmaturity generally,oneyear thematurityvaries

accordingtothe

agreementwiththe

borrowers

loansize smallamountsand

dependedoncapital

canbevariedbythestatus

oftheborrowerandthe

assetsofthebank

useofvolunteers varied onlysalariedstaff

governmentsubsidies none actively,determinedby

regulations,

thegovernmentalso

established2participation

banksin2015and2016

limitofprofit locatedinwaqfiyahand

alsodeterminedbythe

Qadiorotherscholars,

therearenoexcessive

profits

Theprofitfrom

murabahah,tawarruqand

ijarahisdeterminedby

theregulations.

Conclusion

CWs and modern interest-free financial institutions are generally similar to each

other at the operation ways of cash money. But, the purposes are absolutely

different. Because the intentionof the founders of CWs is to takebenefits of this

actionatHereafter53.However,themainmotiveofinterest-freefinancialinstitutions

isprofit.

CWs fulfilled the task of modern states such as religious, educational,

infrastructuralandmunicipalservicesbyfinancingthem.Theywereestablishedfor

theneedsoftheregion.Inthiscontext,theyhadbecomeoneofthedeterminantsof

regionaldevelopment.Theirsecondaryobjective,providingcash,helpedtofinance

53Hereafter(Akhirah)meansAhiretinTurkishandreferstoafterlife.

the investmentsofartisans,entrepreneurs, farmers,merchantsetc.Moreover,this

secondaryobjectivealsoprotectedthemfromusuriousborrowingandloansharks.

ThankstoCWs,the lendingrateswasnotveryvolatileandtheireffectonfinancial

stabilitywastooclear,becausetheoperationrateweregenerallybetween10%-15%

inRumeliaProvincefromthefirstknownCWin1423untiltheendoftheOttomans

in1922.Furthermore,theyhavebeenpioneersofthemoderninterest-freefinancial

institutions.

Themoderninterest-freefinancialinstitutions,especiallyparticipationbanks,

werefoundedtorespondtotheneedsofMuslimswhodidnotwanttoparticipatein

the current interest-based financial system. These institutions are against to the

makingmoneyonmoney,interest-basedborrowing.Inthisway,theypreventunjust

enrichment and provide real-sector based growth in the economy by financing

productionandtradeactivities.Theinstrumentsofinterest-freefinancialinstitutions

have varied according to the requirements of the era. But, ifwe explain itwith a

compass metaphor, the key pillar of this compass stands on the sine qua non

(essentials) of Islam as the prohibition of interest, staying away from harams etc.

These institutionscanbeassessedasevolvingwiththeconditionsof theirperiods.

Theyaresimilar intermsofoperations,buttheydecomposefromCWsintermsof

purpose.

Interest-freefinancial institutionsemergetomeettheneedsofthemodern

era as the CWs responded to the needs of society in their period. This situation

actually isan indicatoroftheflexibilityandpragmatismof Islamiceconomic,social

and legal institutions. CommonMuslim mind has always had Islamic solutions to

problemsoftheerafromthepasttopresent.

Inconclusion,itcanbesaidthatmentally,themoderninterest-freefinancial

institutions are a serious alternative and opponent of the interest-based financial

systemwhichaimscapitalaccumulationandlimitlessprofiteventhoughthecurrent

sharesdonotshowthat.Thesolutionoftheproblemscreatedbytheinterest-based

financial system and if the establishment of CWs is allowed, they will become a

complement of modern interest-free institutions. They also will contribute to the

institutionalizationofcharityworksmore.Duetotheparticipationbanksthathave

alreadytechnicalinfrastructure,thetransactioncostswillalsobelow.Althoughthe

collectedmoney isheld in theseparates funds, theshareofparticipationbanks in

the whole sector will increase, hence the volume of transactions is larger.

Furthermore,thespreadofCWswillhelptostay liquidand increasetheflexibility.

The establishment of Vakıf Participation Bank in Turkey is a great opportunity to

starttheseactivities.Theconjunctureandcurrentdevelopmentsrefertothebright

futureoftheIslamicfinanceindustry.

References

ArchiveSources

• TheArchiveofT.R.PrimeMinistryDirectorateGeneralofFoundations

o RegisterNo:570,PageNo:40-42,SerialNo:17

o RegisterNo:580,PageNo:384,SerialNo:213















o RegisterNo:987,PageNo:101-102,SerialNo:35-1



• EdirneShariaCourtRegisters

o RegisterNo:4955Page:147(74)

• RodoscukShariaCourtRegisters

o RegisterNo:08454.00051v.59/b

InternetSources

• www.quran.com-TheNobleQur’an

• www.tkbb.org.tr-ParticipationBanksAssociationofTurkey

• www.vakifkatilim.com.tr/hakkimizda/index.html-VakıfParticipationBank

• www.kuveytturk.com.tr/social_responsibility_projects.aspx - Kuveyt Turk

ParticipationBank

• en.albarakaturk.com.tr/investor_relations/detail.aspx?SectionID=3yxZnyldt7

BhdmdvQL%2bLDg%3d%3d&ContentID=Gq550BfHYdLNp9Facz%2bB5w%3d%

3d–AlbarakaTurkParticipation

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