The Interest-Free Instruments Used for Public Borrowing in the Ottoman Empire and Medieval Europe: A Comparative Perspective

Abstract

Borrowing is not only a practice of individuals and corporations, but the states also borrow to afford their expenditures. Similar to individuals, the states have borrowed since ancient times. Most of such loans have been at interest. However, the authorities have restricted or prohibited interest-based lending in various societies. Thus, the city-states of Medieval Europe and the Ottoman Empire could not always use ordinary borrowing instruments due to the prohibition of interest. Since, in recent years, the modernized forms of the early interest-free public borrowing methods are being asserted to be used by modern economies as well, the paper evaluates the methods used by the European city-states and the Ottoman Empire. At first, rentes and compera, the public borrowing methods used by city-states in Medieval Europe, are presented. Then, iltizam, malikane, and esham, the instruments used by the Ottoman Empire, are introduced. Lastly, the similarities and discrepancies among these interest-free methods utilized by the city-states and the Ottoman Empire are scrutinized.