Jared Rubin on Religion & Credit Risk in the Ottoman Empire
Date: March 6th, 2016

When it comes to wielding economic power in society, and getting the best interest rates on loans, most people would expect that the wealthy and politically connected would be in a better position than others.  While generally true, Prof. Jared Rubin — an associate professor of economics at Chapman University and associate director of the Institute for Religion, Economics, and Society — points to a very interesting period in Islamic history where this didn’t necessarily hold true.  In fact, it was during the late Ottoman Empire that those in socially-disadvantaged positions were able to secure lower interest rates on loans than the rich and powerful.  The groups paying lower rates on credit included women, the poor, and non-Muslims.

As Jared has been a guest on the show before, we open with a bit of banter about what he has been up to, which includes writing a new book and wrangling over the title of that book.  Our conversation then jumps to a recent project with another RoR guest, Timur Kuran.  Here, these two scholars take a look at how interest rates were set in the late Ottoman Empire (circa 17th and 18th centuries).  Jared spends some time filling us in on what this period in Ottoman history looked like, with a survey of the legal, banking, and commercial system that was in place and how religiously diverse Istanbul and other parts of the empire was.  This discussion also covers how women were able to accumulate wealth during this period of time, an important observation as females were part of the credit market in the Ottoman Empire.  Jared explains the importance of interest in credit markets and how Islamic rules on usury operated.

The next step in our discussion covers how individuals with legal and financial power can often gain favorable access to credit, a result that is not surprising to most folks.  However, we quickly learn that during the period under examination by Profs. Rubin and Kuran, the well-connected often paid higher interest rates than those in a less favorable social position.  Jared points out that titled elites (i.e, the politically well-connected), Muslims, and men paid a premium on their loans relative to those not politically connected, females, and non-Muslims.  He explains how Timur Kuran discovered this empirical oddity while conducting extensive archival research, and how both of them thought it was merely a problem with a small sample size or poor data recording at first.  However, the more they examined the situation, the more it revealed a fascinating puzzle.  Jared explains that because the politically well-connected and Muslims would oftentimes get favorable decisions from the court system when they defaulted, lenders would build in a small premium to manage this increased risk.  Non-elites and non-Muslims (e.g., Christians and Jews) were less likely to receive favorable judgments in default hearings and thus were incentivized to be more careful in paying back their loans.  He also notes that males had an easier time fleeing when it came time to pay back their loans, whereas women had fewer exit opportunities and were thus a lower lending risk.  Our discussion explores the magnitude of these differences as well as the varying types of legitimate and illegitimate default.

The latter portion of our podcast explores why a similar pattern did not arise in Christian Europe as well as some modern extensions of this theory that take us to the land of Brazil and how this affects the ability of the poor to get apartments when renters’ rights are so strong.  While Kuran and Rubin’s work on the Ottoman Empire seems to be a historical oddity, Jared notes that their findings fit nicely into our knowledge about credit risk today and could be useful in explaining financial results in other parts of the world or during other periods of time.  We discuss some of the more surprising things he learned from this study including how going into empirical data with an open mind can often times prompt interesting theoretical questions, and how history is a good teacher.  Recorded: February 17, 2016.

Note: Due to some phone issues, portions of the podcast had to be edited.  We attempted to do this as seamlessly as possible.


Prof. Jared Rubin’s personal website and his bio at Chapman University.

The Institute for Religion, Economics, and Society (IRES) at Chapman University.

The Association for the Study of Religion, Economics, and Culture (ASREC).

The Financial Power of the Powerless: Socio-Economic Status and Interest Rates under Weak Rule of Law,” by Timur Kuran and Jared Rubin.

Graduate Student Workshops on the Economics of Religion at ASREC.


Jared Rubin on Christian and Islamic Economic History.

Timur Kuran on Islamic Law and Economic Development.

Timur Kuran on Islamic Economics.

Murat Iyigun on Monotheism, Conflict, Europe, and the Ottomans (and the Blues).

Leave a Reply

Listen or Download This Episode
Search The Podcast
To search the podcast, type a term and click the Search button.

Connect With Us