The Long Divergence: How Islamic Law Held Back the Middle East

By Timur Kuran | Go to book overview

6
The Absence of the
Corporation in Islamic Law

The year 1851 saw the founding of the first predominantly Muslim-owned joint-stock company of the Ottoman Empire: the Sirket-i Hayriye marine transportation company, literally the “Auspicious Company.” Headquartered in Istanbul, its ownership was divided into 2,000 tradable shares. At the time, the empire was just beginning to install the requisite legal infrastructure. Commercial courts established to enforce the newly adopted French commercial code were in their infancy, and the opening of an organized stock exchange was not even on the drawing board. Nevertheless, Sirket-i Hayriye began operation under the patronage of sultan Abdülmecit, its largest shareholder. The remaining shares were purchased by Turkish officials and a few prominent financiers, almost all Armenian.1

For lack of a suitable Turkish word, Abdülmecit characterized Şirket-i Hayriye through a neologism derived from the French compagnie and English “company”: kumpaniye. What was his motive for favoring an organizational form alien to Islamic law, the traditional basis for commercial contracts? The Ottoman economy was now dominated, he observed, by large and permanent enterprises, in other words, kumpaniyes. The emerging banking, mass transportation, and manufacturing sectors consisted of kumpani yes, all owned by foreigners and minorities; it was time for Muslims to join the trend of pooling resources within modern enterprises.2 Evidently Ottoman elites of the mid-nineteenth century considered Islamic partnerships ill-suited to the new economy that

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