A charitable endowment usually locks capital up forever in land or a building; Ottoman jurists instead let donors endow raw cash and had trustees relend it forever, funding schools and welfare purely off the spread between what a waqf's money cost to borrow and what it earned relending it.

the problem

a charitable fund needs a perpetual income stream, but the standard endowment vehicle locks capital into an illiquid fixed asset

background

what everyone would do

The traditional charitable endowment locked capital permanently into a specific piece of land or a building, generating income only from renting that fixed asset, the established waqf structure everyone understood and that Islamic legal tradition already recognized as valid.

what they saw

Süleyman's jurists saw that a land-based endowment was structurally limited, illiquid, unable to be redeployed as needs shifted, and earning only whatever that specific property happened to produce, while simply lending cash for profit ran into Islamic law's prohibition on riba. The fix wasn't accepting either limitation, it was reframing the return on relent cash as istirbah, profit-share, rather than interest, a careful legal distinction that let the endowment's underlying capital be cash itself, continuously relent to a rotating pool of borrowers, rather than parked forever in a single illiquid asset.

the move

Cash waqfs let a donor endow a sum of money directly rather than property; a trustee then relent that capital continuously to a rotating pool of borrowers, who repaid it with a return charged, per Bursa's surviving records, at a consistent 9 to 12 percent annually between 1667 and 1805, appreciably below the city's open market rate of 18 to 25 percent. Surplus beyond operating costs was added back to the endowment's capital each year rather than distributed, letting a waqf's lending pool grow rather than merely hold steady.

why it works

Structuring the endowment as a revolving loan fund, with surplus beyond operating costs added back to capital each year rather than distributed, meant a cash waqf's lending pool could grow over time rather than merely sustain a fixed level of income the way a rental property's earnings would plateau at whatever rent it commanded. Because the endowment's capital was liquid and continuously redeployed rather than locked into one physical asset, it could scale to serve a large and growing pool of borrowers, roughly 6,648 borrowers a year by 1767 in Bursa alone, injecting credit into the local economy at a volume no single rented building could ever generate. Pricing loans below the city's open market rate, 9 to 12 percent against 18 to 25 percent, gave the waqf a durable competitive advantage as a lender specifically because its charitable purpose let it accept a lower return than a purely profit-seeking lender would, which is why 81 percent of the longest-lived waqfs in Çizakça's census had actually grown their capital base through reinvested profit rather than merely preserving the original gift.

the payoff

By 1767, Bursa's cash waqfs served roughly 6,648 borrowers a year, about 10 percent of the city's population of 60,000, injecting nearly half a million grus of credit annually into the local economy, close to ten times the state's own tax revenue from the city's silk-cloth press. Of the endowments in Murat Çizakça's full census, roughly 20 percent operated for over a century, and 81 percent of those long-lived waqfs had grown their capital base through reinvested profit or additional donations rather than merely preserving the original endowment.

where it breaks

The mechanism depends on borrowers actually repaying reliably enough that the revolving fund's capital base doesn't erode through defaults, since a loan-based endowment carries genuine credit risk a rental property never does — a building keeps earning rent even if a given tenant is unreliable, while a cash waqf's entire model depends on the rotating pool of borrowers making good on what they owe. It also depends on the legal or regulatory environment continuing to permit the specific framing that made cash-based lending acceptable, exactly the vulnerability that eventually caught up with Ottoman cash waqfs as state centralization from 1863 onward and the rise of modern commercial banks displaced them, their total yield falling to a fraction of formal bank lending by 1909. And the model requires competent, honest trustees managing continuous relending decisions year after year, a more active and error-prone management burden than simply collecting rent on a fixed property, meaning the revolving structure trades the illiquidity of a land-based endowment for genuine ongoing operational and credit risk that a passive rental asset never has to manage.

what came after

Cash waqfs financed teacher salaries, religious instruction, tax relief and public meals for the poor across the Ottoman Empire for more than three centuries before state centralization from 1863 onward and the rise of modern commercial banks eclipsed them; by 1909 their total annual yield had fallen to a fraction of formal bank lending in the same cities. Economic historians studying the Bursa registers cite cash waqfs as a working medieval and early-modern precedent for a revolving charitable loan fund, financing perpetual operations from the spread on relent capital rather than a one-time gift.

references

1. [1]Riba as Process: An Ethnographic Reading of the 1548 Ottoman Decree on Cash WaqfsJournal of Islamic Economics and Finance (peer-reviewed), 2026dergipark.org.tr
2. [2]Ottoman Cash Waqfs Revisited: The Case of Bursa (1555-1823)Journal of the Economic and Social History of the Orient (Murat Çizakça, peer-reviewed, 1995), hosted by Muslim Heritage, 1995muslimheritage.com

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