Bridging the Gap: The Restitution of Historical Cash Waqf Through Vakıf Participation Bank

Abstract

Financial needs have been met through formal or informal institutions throughout history. Some of these institutions have been operating for many years and have developed and adapted to suit the current time. In the Ottoman Empire (1299-1923), cash waqfs were served as financial and social institutions in the society since the early cash waqfs were established in the period of Murad II and Mehmet II in the 15th century. The main aim of a cash waqf is to provide financial services to the different strata of the society, ranging from poor people to merchants, and to generate income, which would be used for the specific purpose of the waqf. They operated until the first years of the new Turkey after the collapse of the Ottoman Empire. As to the Islamic finance in Turkey, it has not been applied as a formal institution in many years and the history of Islamic banking in Turkey goes back to the legislation in 1984, which allowed the establishment of Islamic banks (IBs) under the name of Special Finance Houses (SFHs). The name of these institutions was changed to Participation Banks (PBs) in 2005 and the Islamic finance sector has been a strategic sector especially in recent years. The aim of this paper is to give a brief history of Islamic finance in the Ottoman Empire through cash waqfs and in modern Turkey through PBs. Thus, the process of the change of the Islamic finance applications, from cash waqfs to state-owned PBs, within six centuries, will be explained by giving a chronological outline. And finally, the bridging purpose of the recent government between cash waqfs and Vakif PB will be evaluated and some suggestions will be proposed to PBs, Vakif PB in particular, to improve the social aspects of them through the benefit from the cash waqf experience