CASH WAQFS AND THEIR ACCOUNTING APPLICATIONS AT THE END OF THE 18th CENTURY IN THE OTTOMAN EMPIRE

Abstract

The private sector in the Ottoman Empire was not able to develop because of the statist approach that was prevalent at those times. This led to the use of the private sector’s wealth for social purposes in the public area. To be able to meet this necessity, waqf foundations were formed. Since the private sector could not develop, there were small-scaled enterprises in the economy and cash waqfs were founded in the waqf system to meet the financing requirements of these enterprises. Because of the Islamic view that interest was forbidden, the foundation of cash waqfs was only allowed in the 16 century provided that the interest revenues were used for social purposes. At the end of the 18 century, which is the analysis period for this paper, there were about 500 cash waqfs operating in the Ottoman economy. Notably, cash waqfs showed an immediate development in the Ottoman waqf system and supported the Ottoman economy by granting credits. Because of the interest rates that could not increase above a specified level and the necessity to use interest revenues for social objectives, both the foundation procedure of cash waqfs and necessity to control their operations were crucial. The foundation procedure problem was solved by the preparation and approval of a waqf foundation document (vakfiye) as a legal order. The problem of following and controlling the cash waqfs’ operations was solved by utilizing the accounting applications. The accounting method that was used in the Ottoman Empire for state accounting was the stairs method. This method was also utilized in waqfs’ accounting. However, the accounting requirement of cash waqfs was different from state accounting and indeed the cash waqfs needed an accounting system of a financial institution. But, Ottoman accountants did not know any accounting method other than the stairs method. For these reasons the cash waqfs also had to use the stairs method and in fact they used it for centuries. However the use of this method could only be realized sometimes by making concessions about the principles of the method, and sometimes by not going into details in the accounting applications. In fact, the end of 18 century which is the analysis period of this paper was the period when the stairs method was hardly meeting the increasing necessities. As a matter of fact, when the modernisation process started in Ottoman enterprises by the announcement of administrative reforms in 1839, the search for a new accounting method became more important and in the second half of the 19 century (1879) the stairs method was abandoned and the double-entry method started to be used. Reforms in 1839, the search for a new accounting method became more important and in the second half of the 19 century (1879) the stairs method was abandoned and the double-entry method started to be used. The aim of this Yrd. Doc. Dr. Ege Universitesi IIBF Isletme Bolumu Doc.Dr. Ege Universitesi IIBF Isletme Bolumu Doc. Dr., Dokuz Eylul Universitesi IIBF Isletme Bolumu