Forgotten Ottoman Empire


The multiplicity of issuers and exchange rates resulted in a significant cost treatment, resulting in the efficiency of the monetary system of the Ottoman Empire was one of the lowest levels in Europe.

Finance for the Sultan

The financial sector of the empire formed a large number of private intermediaries, called sarrafs (sarrafs). Financial intermediaries have been involved in several operations. First, they are financed by foreign trade unsecured notes. Writing out the "fictitious" debt, they provided a loan that was used by merchants. Secondly, since the 1760s sarrafs regularly organized for the Sultans of short-term "personal" loans in Europe.

Thirdly, with an extensive international network of retail and banking houses sarrafs issue guarantees for foreign investors to invest in the empire. Fourth, the financial intermediaries active in speculation in the foreign exchange and money markets, their responsibility to conduct foreign exchange transactions and original conclusion of forward contracts on the future price of gold and paper money. Fifth, the short-term loans issued sarrafs imperial treasury. Finally, the sixth, they discounted the Sergi (sergi) and hawala (havale) - bills of exchange drawn by the Ministry of Military Affairs and other government agencies.

With the emergence of banking sarrafs played a key role in the penetration of Western institutions to the market of Constantinople. In particular, they acted as mediators in refinancing debt Ottoman Empire and the establishment of local branches of foreign banks.

New banking California

The first paper issue of education has been undertaken by the Government of the Ottoman Empire in 1839, and the urgency of the Notes had matured, eight years after the issue date. For large denomination bank notes were paid 8%, then the interest rate was reduced to 6%. The first banks in the Ottoman Empire emerged in the mid XIX century. In 1847, was founded by Banque de Constantinople, six years later - Banque Ottomane, another seven years - Union Financiere. Their founders were enterprising Greeks, who had personal connections with the court of the Sultan. The primary objective of the banks obeyed the public interest, in particular, their main task was to stabilize the exchange rate of paper money relative to silver. Since the bills were introduced in the domestic market, the interest rate on them growing up, that with the increasing amounts of paper money to make it too expensive for the government budget. Among other things, puts the power of the banks, was to reduce interest payments on bank notes. All three of the first bank to open in the empire, with the passage of time have been converted or eliminated due to their inadequate financial support from the authorities.

Taking advantage of the plight of the Empire after the Crimean War (1853-1856 gg.), Europe has managed to impose on the country unfavorable financing terms. About outrageous terms on which loans are presented can be judged by the first agreement of 1854 out of the total of British credit, equal to 3.3 million Turkish pounds, the Ottoman treasury was able to get only 2.5 million remaining money was deducted as interest payments and account of previous debts. The severity of the external debt was so great that it had to repay about half of all government spending.