How the banking system arose?

Dear visitors of Muslim Politic,

Almanacs of useful knowledge keeps on acquaint you with interesting and cognitive facts for the time being and in the past. Here, one of those facts is astonishing progress in economic area that was achieved by the successors of the Great Islamic Civilization.

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It might seem strange prima facie, but the analogue of modern non-cash payment system had been using for the first time at the state level in former times. And European states had become acquainted with this system during the epoch of fluorescence of the multinational and multiconfessional Caliphate.

It is known that in Caliph Umar’s time dwellers of the Arabian Peninsula had being using special checks to obtain provisions from Egypt. The word “check” had come to European usage from Arabic-Farsi “saqq” that meant an agreement or document or receipt. The circulation of checks among citizenry of the Muslim State had been widely spread and diversified. Merchants from Morocco and Cairo to China used the checks for purchase and sale, and the only guarantee was the confidence partners which

—         in some cases didn’t formalized at all;

—         in some cases was approved by special bills;

—         and in some cases was approved by notary’s offices.

 This was in the Middle Ages when many other regions of the world experienced great lack in communication and acquaintance.

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Currency sums operated by bankers raced into the fabulous amounts for those times. Some historians mention about checks for more than 40 000 dinars when dinars were real gold money. There are references to, so called, unlimited loans when sponsors allowed their managers to give out “all the demanded”.

Of course this was done in extreme cases of creditworthiness. It is true that personal accounts were required in such development of banking system. These accounts offered an opportunity to travel faraway with minimum currency amount and not to be afraid of money lost or other misfortunes. Non-cash system had being spread so prevalent that in some regions most merchants paid for goods by checks.

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Modern banking system in many respects is similar to the medieval one. Of course, today it’s more advanced but the principle of functioning didn’t change virtually. The only and the basic difference is the interest rate missing in the Islamic world, and this rate more than once caused great economic shakes.

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