Salam Moneylending Contracts
Of the many types of credit arrangements available, salam (advance-purchase) contracts were the most widely used, especially in olive-producing hill regions. The underlying principle of a salam contract is the immediate advance of money by the first party for the future delivery by the second party of movable collateral—usually foodstuffs—at a reduced price fixed at the time of agreement. The key provision is that the agreed-upon amount of, say, oil must be delivered to the first party in kind regardless of what the market price of this commodity happens to be at the time of harvest. Depending on the power relationship between the parties, the cash advance could contain a substantial (illegal) hidden rate of interest that insured a handsome profit for the moneylender even if market prices dipped below anticipated levels.
Salam contracts were not a modern innovation. The rules governing them had been laid out clearly in Islamic law many centuries before. The Hanafi school of jurisprudence,[6] for example, requires that the capital be advanced at the time the contract is drafted and that the type, quantity, and quality of the commodity be specified, along with the date and place of delivery and whether the commodity was grown on irrigated or rain-fed land.[7]
Moneylenders did not turn to state institutions to legitimize this type of transaction. Rather, salam contracts were drafted in what actual documents refer to as majlis al-aqd (contract assembly or meeting). Majlis al-aqd did not indicate a specific location or a public space. Rather, it was anywhere two people sat down together in order to draft a contract—usually at a merchant’s shop or home. Consequently, there are, to my knowledge, no salam contracts recorded in the central Ottoman archives and certainly none in the records of the Islamic court or Advisory Council, though the latter two contain lawsuits that refer to the existence of such contracts.[8] Fortunately, the private papers of the Nimr family contain a sufficient number of salam contracts to allow for an in-depth look at how they worked and how their use changed over time.[9] These are supplemented by additional information in the lawsuits over salam arrangements, in some inheritance estates that listed outstanding loans, and in peasant petitions.
As the following example, dated early January 1828, shows, these contracts invariably conformed to guidelines set by the Hanafi school of jurisprudence:
On the date [registered] below, Husayn Abd al-Qadir, Awad son of Shehada, Abd al-Hayy son of Jabir, and Musa son of Abid—all from the village of Salim—testified that they received from the Respected Right Honorable Ahmad Agha…al-Yusufi [Nimr] a sum of 1,025 piasters…as a legal salam for 100 jars of oil [measured by] the container of the [Yusufiyya] soap factory—each jar for 10.25 piasters—for a period of ten months. [They are to] deliver one-half [of the oil jars] now, and the other half in the middle of Rabi II, 1244 (late October 1828) to the Yusufiyya soap factory.[10]
Regardless of whether the price of olive oil multiplied many times during these ten months, the three peasants from Salim had to provide the amount of oil in kind that was agreed on and not ask for a single piaster over and above what they originally received. Of course, a bumper harvest might bring the price of oil to a point lower than the amount set earlier. Moneylending arrangements, however, usually worked in favor of the owner of capital: he could spread his risk around, had a far greater knowledge of the market, and, in the case of big merchants, was able to influence the market trends on certain commodities. Peasants were often in no position to bargain for favorable prices because they usually borrowed money out of dire necessity: to pay taxes, to recover from a bad harvest, to purchase goods for a wedding, or to meet a myriad of other needs.
Most important, salam contracts usually contained a calculated rate of interest disguised as an artificially low price for the commodity in question, hence guaranteeing a profitable return when the lender sold the goods on the open market after they were delivered by the borrower. Usury (riba), of course, was officially prohibited. In practice, however, moneylenders tied the amount of interest to the length of the waiting period: the farther away the delivery date, the lower the unit cost to the merchant (see below). Thus, Ahmad Agha Nimr advanced the paltry sum of 10.25 piasters for every jar of oil to be delivered ten months later, even though the price of each jar on the open market averaged 23 piasters.[11] The frequency with which moneylenders swore in writing at the end of many contracts that no usury was involved is in itself an indication of at least the perception that usury was an integral part of this arrangement.[12]
The ease with which a rate of interest could be hidden in salam contracts was one reason for their popularity. No matter how low the price, most peasants could not legally challenge these contracts in court as long as they technically fulfilled all the conditions of Islamic law.[13] Only one of the dozens of disputes over salam contracts registered in the Nablus Islamic Court between 1850–1870 mentioned usury as an issue.[14] In all of the rest, peasants insisted that no salam contract had been drawn up, that they were willing to reimburse the moneylender in cash, not in kind, or that the goods had already been delivered.[15]
The exception involved the case of two peasants from the village of Awarta, dated January 20, 1862.[16] The plaintiff, Odeh al-Qasim, testified that he had advanced the defendant, Sulayman al-Bashir, a sum of money in return for 68 jars of olive oil and claimed that he had only received 42.5 jars and 3 uqiyyas. He then demanded that the terms of the lawful salam contract be fulfilled. Sulayman al-Bashir freely admitted to the contract and the remaining debt, but he insisted that he was not obligated to provide the rest of the oil because usury was involved. The judge asked al-Bashir to prove this charge, but he could not. The defendant’s last hope lay in demanding that the first party swear under oath that no usury was involved. Odeh al-Qasim readily did so and won the case.
Another reason for the pervasiveness of this type of moneylending was the need of merchants and artisans to secure supplies of agricultural raw materials for the purposes of local production and regional trade. This was especially important with olive oil: urban soap merchants and manufacturers needed large quantities of olive oil every year, and they could not risk wide fluctuations in availability and price.[17] In the salam contract quoted above, Ahmad Agha—scion of the Nimr family at the time and waqf superintendent of the Yusufiyya soap factory (built by his ancestors more than two hundred years earlier)—clearly entered into an advance-purchase contract for precisely this reason. The contract was drawn at the end of the olive harvest season (early January 1828), and one-half of the olive oil was to be delivered ten months later, at the beginning of the next harvest season (late October 1828). In short, Ahmad Agha Nimr used this type of contract for the purposes of production, not for speculation, investment, or trade in agricultural commodities.
Salam contracts were also desirable because most other forms of moneylending required immovable property as collateral. Aside from their lands, peasants could offer little in return except the future delivery of their harvests. Finally, salam contracts negotiated directly with peasants allowed merchants to bypass market regulations and various revenue-collection measures imposed by the government and ruling families. Salam contracts, in short, were flexible and allowed for a wide range of urban-rural moneylending arrangements. As will be seen below, this flexibility also proved to be eminently suitable for speculation and for the local organization of commercial agricultural production for export overseas. Indeed, local moneylending arrangements cleared a path for the increasing involvement of foreign and coastal merchants who wanted to extend their operations to the interior.
The same factors that caused a steep rise in moneylending transactions, especially the much more conducive political environment, also led to a diversification in the social composition of moneylenders. Previously, the enforcement of debt obligations had been fraught with uncertainties despite the influence of the merchant community and the rootedness of its networks. By the 1840s, however, moneylending had become a much easier proposition for those who lacked political influence. Indeed, it seems that almost anyone with access to capital, no matter how small, found opportunities for moneylending and trade. Although this phenomenon was neither new nor unique to Jabal Nablus[18] or Greater Syria,[19] there is little doubt that during the nineteenth century moneylending came to involve far more people and to take on an even more central and defining role in the social formation of Jabal Nablus than it had during the previous Ottoman centuries. Illustrative in this regard is a comparison of two instances of moneylending to peasants in the same village, Salim.
The first case (1828), cited above, was typical of more traditional uses of the salam contracts. The male representatives of three peasant families who borrowed money from Ahmad Agha Nimr shared with him a common memory of frequent dealings over generations. Salim was located in an area east of Nablus to which the Nimr family had had privileged access for generations in the form of timar land grants and tax farms, as sipahis and multazims, respectively.[20] The brother of Ahmad Agha Nimr’s great-grandfather, for example, collected taxes from Salim on a regular basis in the early 1700s.[21] Ahmad Agha Nimr, therefore, could rely on his family’s historic ties and political influence over this region in order to secure supplies for his soap factory. The Nimrs also took advantage of long-standing political, economic, and social connections to subcontract salam loans on behalf of oil merchants and soap manufacturers.[22]
The second case (1861), shows that even a simple merchant was able to establish an impressive foothold in Salim village, primarily through moneylending—even though he was neither rich nor politically influential. This information can be gleaned from the inheritance estate of Abd al-Rahman Qan‘ir, a retail grain merchant who dealt mostly in wheat, barley, corn, burghul (wheat that is cooked, parched, then crushed), and meadow vetch.[23] When his belongings were registered in late November 1861, he had eighteen outstanding loans, all of them owed by individual peasants from the village of Salim. Some of these loans were salam contracts for wheat and barley; others were non-interest-bearing loans (qard); and some were a combination of both. For instance, Jabir son of Yusuf al-Dabbagh owed Qan‘ir 80 piasters’ worth of wheat and barley, as specified in a salam contract. He also owed him 565.5 piasters for a non-interest-bearing loan for which he put up one-quarter of a feddan (one feddan being equal to one-quarter of an acre) as collateral (rahn).
Qan‘ir also invested heavily in factors of production in order to better control the grain surplus of Salim village. For example, he helped the Salim peasants buy draft animals, and at the time of his death a number of them owed him shares of cows and bulls. He also had the right to shares of the proceeds of a number of maris lands,[24] put up as collateral by peasants who owed him money but were not able to pay on time. Over the years, therefore, Qan‘ir managed to construct a network of dependency among eighteen peasant families. His business network illustrates how moneylending could be used not only to secure needed supplies but also to pave the way for urban investment in rural production and trade and for the commoditization of land and its appropriation by urban merchants.
In this supportive economic, political, and legal atmosphere, even poor artisans and small merchants could safely enter moneylending arrangements—though these were usually for minuscule amounts. For example, the estate of a poor artisan (1861), Abd al-Al al-Masri al-munajjid (upholsterer), showed that he had concluded a salam contract with a bedouin in order to secure his supply of wool.[25] Similarly, the estate of a small retailer (1863), Sa‘id son of Hajj Salim al-Ra‘i—who sold iron tools for peasants as well as grains and olive oil for city folk—included salam contracts for wheat, olive oil, and onions whose value amounted to almost half of the estate’s total worth.[26] Around the same time (1864), the proprietor of a cotton-ginning shop, Hajj Rajab son of Hajj Salih Abi Suwwan, had a number of salam contracts with peasants from Baqa al-Gharbiyya and Attil villages for small amounts of cotton-in-the-boll and for cotton seeds.[27] These examples all illustrate the extent to which peasants had been individually recruited and integrated into a quickly expanding and increasingly depersonalized market of exchange.
This trend is further illustrated by two important developments in the use of salam contracts. First, salam contracts were frequently turned into a tool of speculation, trade, and investment in agricultural production for overseas markets. Second, salam contracts were resorted to on a routine basis not just by individual peasants but also by the populations of entire villages, primarily in order to meet their tax obligations. Both developments created dynamics that further facilitated the circulation of merchant capital in the hinterlands. These two developments will be addressed in turn.