Banking in Izmir in the early twentieth century

Abstract

This is a study of the emergence and development of the modern banking sector in the Middle East in the late nineteenth and early twentieth centuries, and of the role of multinational European financial capital therein. The study focuses on the port-city of Izmir which is seen as a prime example of inter-imperialist rivalry. As the premier export market and urban centre in the Empire, the city also came to dominate commercial banking operations in the Ottoman Middle East in the period under study. As a result Izmir saw the development of a vibrant and competitive banking sector, second in importance only to that of Istanbul. The appearance of a well-capitalized banking sector, closely connected to Western credit markets, and where Western banks were dominant, was the last stone in the edifice of economic growth of Ottoman port-cities, along with Izmir, and the single key element still needed to propel them forward. For it was the estimation of Western financiers that Izmir and other regional maritime and urban markets in the Empire were at a level of economic development where a banking sector could function profitably, which led banks to establish branches of European overseas banks here in the early twentieth century. Banks were thus able both to profit from the rapid economic growth of the region and to stimulate it further. Although they impacted banking in fundamental ways, changing it forever, local bankers and their practices did in part survive; local entrepreneurs were not passive recipients of Western investment, but sought to learn from and compete with it, influencing it accordingly. Overall, the growth of the banking sector in Izmir can be assessed as mixed: though beneficial for the economy and society as a whole, the lower ranks of the banking profession did not fare too well from the competition.