Various communities had taken credit for their contributions to the development of modern business transactions. It is known to very few what were by Islamic Civilization to the methodology of commercial transactions done today. The Geniza documents that were unraveled and discovered had opened quite a few doors, which were shut for long. It has not just made people visualize the commercial scene of the Middle Ages but it has also shown how developed and disciplined the system had been. It has shown how the dynamics of Islamic economics were working; how it was controlled and how it was monitored. And how it derived laws from religious tenets. This discovery is in fact a great treasure for any student of modern economics, business, law and anthropology. And this study would be no doubt very important for students of Islamic economics and finance. 

A great treasure of records from all over the Mediterranean countries and mainly from Eleventh through Thirteenth centuries, has been preserved in the so-called Cairo geniza. These documents were discovered in 19^th century in a synagogue in old Cairo. The Hebrew word Geniza (pronounced gheneeza) like Arabic janaza (which means “burial”), is derived from the Persian. In Persian ganj denotes a storehouse or treasure. In medieval Hebrew, Geniza or rather beth Geniza designates a repository of discarded writings. 

This write up is an analysis of the two volumes titled, A Mediterranean Society, The Jewish communities of the Arab World as portrayed in the documents of the Cairo Geniza, written by S.D. Goitein. He was o­ne of the Jewish orientalist pioneers. His work is divided into three volumes and there are altogether ten chapters in them. This work is published by University of California Press, and for my analysis, I had taken the o­ne published in 1967. The chapter that concerns us is Chapter Three from the First Volume, titled, ‘The world of Commerce and Finance’. Goitein has done an excellent and painstaking work to study these documents and then write a commentary o­n it in the best possible way.  

From an objective point of view, I feel we need to be understanding and give every author his due subjective credit. But our objective at looking at these documents is to prove that Islamic finance was well developed during this period; the theory was fully implemented in practice.  

History 

These valuable documents which were found both in Arabic and Hebrew give clear image about the people living between 900 A.D-1500 A.D in the Mediterranean region. A clear economic, political and social environment could be imagined after reading them. These documents were written under the Muslims rulers. 

There were many Genizas which were discovered across the world, but the o­ne which was the most ancient and which had huge source of documents was the o­ne found in Cairo. Geniza was discovered near the turn of century when Oriental and Jewish studies had reached an unprecedented peak. Between 1896-1914 Geniza came to be known to the world.  

Now the question arises why were these documents stored? Amongst Jews there is a custom to store discarded books and writings. It was believed that the burial of the dried out sacred books was conducive to the precipitation of heavenly moisture. At every seventh year it was cleared and also in the year of drought. Hence most of the Genizas found did not have ancient documents expect the o­ne in Cairo. It is believed that because of wars and occupations it was forgotten. In terms of numbers, there are around 10,000 items of some length out of which around 7,000 items are self contained. Leaves plus fragments of books are around 250,000.  

The script of the Geniza documents, irrespective of language used, as a rule is Hebrew. Very considerable quantities of writings are also found in Arabic. Unlike Arabic script the Arabic language prevails in most of the documents. This shows the tremendous usage of Arabic and its influence. During this period the language used in the Jewish courts was Arabic. For some of the Arabic words found in the documents Goitein could not find their meanings in the standard modern Arabic dictionaries. To his surprise he found the meanings of these words when he found them being used in Yemen in their local dialect. Most of the important commercial transactions were documented and stored.  

This work brings out some real nuggets which can broaden the thought process of many. And which could challenge the misconception of many. The documents show the practical side of the economic scenario during this time. And it shows that Islamic finance was very much living and vibrant. Most of the Geniza documents originated from Tunisian merchants living in Egypt or other countries of the Muslim east. Geniza is a primary source for social and economic history during the Fatimid and Ayyubid periods. 

Types of Contracts 

In transactions the most common types of documents were releases, declarations, by o­ne or several persons renouncing all claims against another or others. Letters of attorney are also available describing parties, subject matter, sale agreements, gift agreements and lease agreements. Very few employment contracts are available: reasons are two fold, even a poor laborer preferred to enter into a partnership with a rich fellow craftsman than to become his employee. Today’s business world talks about E-SOPS (Employee Stock Ownership Plans), venture capitalism while entrepreneurship is the modern mantra. 

When it comes to business-letters, trust and friendship was the underlying element in them. They used to begin with enquiring about the health, then the family situation and in the end about business. So these documents also have some lessons o­n business communication.  

In terms of commercial banking it is further illustrated by accounts, inventories of stores and workshops or pawnshops, by bills of lading, promissory notes and orders of payment. A large portion also refers to public affairs be it seeking donations for research and soliciting contributions to works of charity. 

The distinction between retailers and wholesalers was well developed in the society represented in the Geniza papers but not along the same lines as in our own time.  

Even a cursory examination of the Geniza material reveals that lending money for interest was not o­nly shunned religiously, but also of limited significance economically. Goitein analyzed this as being the reason because of the feeling the people had: ‘the borrower is a slave to the lender’. The main reason for the avoidance of interest was because of the strict Islamic abhorrence to the interest in the financial deals. 

‘Interest’ was not accepted in the commercial transactions. And a complete well developed security system was present for business to grow. Globalization was developed. Traders from across the world brought their goods from different countries. Export and import was a common practice. Insurance was developed. Letter of Credit was developed. Forms of guarantee were available. Courts were there to protect the rights, governments were co-operating with each other in their trade relations. 

Concept of Partnership 

Concept of partnerships in business was quite common. This legal institution was enormously developed. It encompassed practically every economic activity: such as running a workshop, building a house; tax farming; working in the royal mint or exchange; and occasionally even in public office such as that of judge, court clerk, or cantor.  

Almost all the commercial industry was set up o­n the concept of partnership. Partnerships could be concluded with regard to money, goods, work or any combination of the three. Any of them could be referred loosely as partnership shirka in Arabic and shuthafuth in Hebrew. In the documents, two main types of contracts are found; in o­ne, the contractors offer the various services in equal or unequal shares and partake in profit or loss in proportion to the investments (this is called musharakah in Arabic); and in the other, o­ne or several partners contribute capital or goods or both, while the other or others do the work, in which case they receive a smaller share in the profits, normally o­ne-third, but do not participate in the losses (this is called mudarabah in Arabic)

Goitein is of the view that these concepts of partnerships were adopted by the Business community in Europe then. From this it can also be concluded that even in the modern western commercial principles there is a great contribution of Islamic commercial law. This was because as an idea these principles were available quite long back in Muslim civilizations. And as mentioned they have their roots in Islamic commercial law.  

As the Geniza records tell us the following points had to be considered in the establishment of a partnership.  

1. The number and status of the contractors.
2. The object of the contract and the aims pursued with it (not always evident from the definition of the object)
3. The nature and extent of the contribution of the partners (capital, goods, premises, or work or two or more of these), and the specific rights and privileges granted to each partner.
4. The partner’s share in profit and loss and their responsibility for the capital invested.
5. Conditions governing expenditure for the partnership and living expenses of the partners.
6. Conflict of interest, namely whether or not the partners could enter into other partnerships involving a similar object while theirs lasted.
7. The duration of the partnerships had to be defined, except in the case of specific commercial ventures, which were, however, the most common object of an association. 

Buying and selling were done either by man-to-man dealings, “in sitting” namely in a store, a bazaar street, a bourse, or in a toll house, or by public auction through participation “in a circle” fi’l-halqa 

In terms of business localities and seasons as even in our sophisticated society, business tends to concentrate in certain areas and periods. The same was the case during the medieval times. Streets were named based o­n the types of merchants located there such as clothiers, wool merchants, dealers in second-hand garments, vendors of wax or of seeds of spices. In addition to open bazaars and squares, there were buildings devoted specifically to commercial transactions. These buildings were referred as qaysariyya. 

A chief pastime of well-to-do ladies was not o­nly shopping, but also selling whatever they wished to dispense with from their ward-robe. No wonder, then, that the dealers in second-hand clothes in Old Cairo had a bazaar. And even today we can find such kinds of bazaars.  

Transaction procedures 

With some exceptions transactions of sales were not put in writing. It was therefore of utmost important to have them witnessed by as many trustworthy and easily available persons as possible.  

Written contracts of sale were made o­nly for houses and other immobile property, for slaves and for books. For prompt payment or rather for what the Geniza documents call, ‘speeding up’, and cash discount was granted. Similarly, references to earnest money or down payment are also seen.  

Business Principles and Policies 

The guiding rule of commerce discernable in the Geniza papers was in keeping o­ne’s capital working all the time. A letter reads, “Do not let idle with you o­ne single dirham(currency unit) of our partnership, but buy whatever God puts into your mind and send it o­n with the very first ship sailing”. 

The very technique of trading was governed by this principle. Another business principle was “ Profit is made through buying well” therefore “ never buy when you are in hurry” 

Indeed we find that the greatest concern of the writers of the Geniza letters was business intelligence. The term used for it, akhbar, “information”, was identical with what we today call, feasibility study report, market intelligence report, business intelligence report and country economic report. 
 

“Sell as long as the dust is still o­n your feet” [from the journey to the market]”

 Another maxim found in the letters, “Leave o­ne thing for the sake of another”, that is do first things first, or renounce even attractive projects in order to succeed in the really important undertakings. And another, “In case of doubt hold back.” 

If, however, through acts of God or through his own fault a merchant found himself unable to meet his commitments, his fellow merchants, as a rule, would come to his assistance and prevent him from becoming bankrupt.  

Accounting system was also seen to be quite well developed in the Geniza papers. All the financial aspects of the business was documented cautiously and diligently. Business co-operation was regarded as a relationship of mutual trust and friendship and consequently, did not require minute reporting o­n the actions taken.  

Profits and Losses 

The merchants of the Geniza period met the constant menace of impending losses in three ways:

 By spreading the risk, by striving for substantial gains and in extreme cases, by mutual help. No type of formal insurance was known to the people of the Geniza letters, but this readiness for mutual help must be regarded as a form of it.  

The Geniza papers have two different terms for the notion of price, si’r the price of the unit sold, and thaman the total proceeds of o­ne sale. The market price as apposed to that actually obtained is also designated by the word si’r 

Banking Practices 

The roles of the banks in this period were as follows.

(a) Bank acted as a money changer and for this service it charged a fee. Secondly, a banker of higher standing used to issue suftajas (Bill of Exchange), whose service, as we have tried to show, carried a substantial fee.  

(b) In terms of money lending o­n securities, these securities were mostly jewellery. Goitein is of the opinion that there must have been a concealed interest but he could not find any explicit mention of it in the documents. Hence it might have been a hypothesis than a true fact. 

(c)Finally, a bank invested the money at its disposal in partnerships and commendas and this was perhaps the main benefit it derived from the sums deposited with it.  

The vital role played by the banker was a function of the monetization of the economy. Gold coin was called ‘ayn’, and silver coin was called ‘waraq’. Money was handled largely in sealed purses of coins whose exact values were indicated o­n the outside.  

Two types of purses are discernible in the Geniza records, those that bore the seal of certified money –assayers of government office; and of a semi official exchange. A banker would act thus o­nly for an accredited customer, mu’amil, and we have to remember that many merchants were “merchant bankers” who were themselves experienced in handling money.  

The banker’s second field of activities also provided the general term for his profession, money changing (cf.sayrafi, changer). At any o­ne point of time a great variety of coinages was o­n the market and it required expert handling. 

The economic strength of a country was as it is today—a strong currency. Despite predominance of the local coinage, money changing was o­ne of the most common activities o­n the medieval markets. Numismatics and economic historians will have to co-operate in order to meaningfully explain the rich information about money changing contained in the Geniza records.  

The rates of exchange granted by the brokers clearly depended not o­nly o­n the metallic content of the coins concerned but o­n market conditions and commercial considerations as well. Money changers were found every where. In Alexandria there even existed a suq-al-sarf. The economy of the period was, to a certain extent, a paper economy.  

Both wholesale and retail commerce was conducted o­n credit. o­ne did not pay in cash for the daily supplies, but sent the grocer written orders, and after a certain number—5,10, 20 had accumulated, they were returned and payment done.  

The form of such a medieval order of payment was very similar to a modern check. Legally, orders of payment were forms of transfer of debt or assignment hawala (a word, by the way, from which French aval, endorsement o­n a bill of exchange is derived). The term for order of payment in Arabic is ruq’a, meaning piece of paper. 

From this general term, the suftaja, a Persian word usually translated as bill of exchange, is to be differentiated. Muslim lawyers defined the suftaja as a “loan of money in order to avoid the risk of transport”. As far as the Geniza papers are concerned the term was used in more restricted sense. Payment through a third party in another city fell under the general category of transfer of debt. 

The suftajas were of more special character. As a rule they were issued by and drawn upon well known bankers or representatives of merchants. A fee was charged for their issue and after presentation a daily penalty had to be paid for any delay in payment. Geniza documents to a large extent reflect a paper economy.  

The paper was used it the following forms.  

Suftajas – Bill of Exchange

 Ruqa- Checks/ Promissory Notes  

Conclusion

As the Geniza documents are available as evidence in various leading libraries and museums of the world, the contention and proof of a well developed economic system under the Muslim rulers in the Mediterranean region becomes an authentic part of history.An analysis of the work of Goitein o­n the Geniza documents proves that a systematic economic system flourished in the Middle Ages. By looking at the transaction it could be deciphered that the economic model was based o­n Islamic principles.

 The writer can be contacted at imadali@financeinislam.com