Question
Explain the Fiscal system and the market exchange methodologies in the central Islamic lands.
Solution
The fiscal system (income and expenditure of the state) and market exchange increased the importance of money in the central Islamic lands.
i. Coins of gold, silver and copper ( fulus) were minted and circulated, often in bags sealed by money-changers, to pay for goods and services. Gold came from Africa (Sudan) and silver from Central Asia (Zarafshan Valley). Precious metals and coins also came from Europe, which used these to pay for its trade with the East.
i. Coins of gold, silver and copper ( fulus) were minted and circulated, often in bags sealed by money-changers, to pay for goods and services. Gold came from Africa (Sudan) and silver from Central Asia (Zarafshan Valley). Precious metals and coins also came from Europe, which used these to pay for its trade with the East.
ii. Rising demand for money forced people to release their accumulated reserves and idle wealth into circulation.
iii. Credit combined with currencies to oil the wheels of commerce. The greatest contribution of the Muslim world to medieval economic life was the development of superior methods of payment and business organisation. Letters of credit (sakk, origin of the word cheque) and bills of exchange (suftaja) were used by merchants and bankers to transfer money from one place or individual to another.
iv. The widespread use of commercial papers freed merchants from the need to carry cash everywhere and also made their journeys safer. The caliph too used the sakk to pay salaries or reward poets and minstrels.Although it was customary for merchants to set up family businesses or employ slaves to run their affairs, formal business arrangements (muzarba) were also common in which sleeping partners entrusted capital to travelling merchants and shared profits and losses in an agreed proportion.
