Debt: The First 5000 Years - autonomous learning

276 DEBT
About 900 a great man paid a poet in this way, only the banker
refused the check, so that the disappointed poet composed a
verse to the effect that he would gladly pay a million on the
same plan. A patron of the same poet and singer (936) during
a concert wrote a check in his favor on a banker for five
hundred dinars. When paying, the banker gave the poet to understand
that it was customary to charge one dirham discount
on each dinar, i.e., about ten per cent. Only if the poet would
spend the afternoon and evening with him, he would make no
deduction . . .
By about moo the banker had made himself indispensable in
Basra: every trader had his banking account, and paid only in
checks on his bank in the bazaar . . . . 71
Checks could be countersigned and transferred, and letters of credit
(suftaja) could travel across the Indian Ocean or the Sahara.72 If they
did not turn into de facto paper money, it was because, since they operated
completely independent of the state (they could not be used to pay
taxes, for instance), their value was based almost entirely on trust and
reputation.73 Appeal to the Islamic courts was generally voluntary or
mediated by merchant guilds and civic associations. In such a context,
having a famous poet compose verses making fun of you for bouncing
a check was probably the ultimate disaster.
When it came to finance, instead of interest-bearing investments,
the preferred approach was partnerships, where (often) one party
would supply the capital, the other carry out the enterprise. Instead
of fixed return, the investor would receive a share of the profits. Even
labor arrangements were often organized on a profit-sharing basis.74
In all such matters, reputation was crucial-in fact, one lively debate
in early commercial law was over the question of whether reputation
could (like land, labor, money, or other resources) itself be considered
a form of capital. It sometimes happened that merchants would
form partnerships with no capital at all, but only their good names.
This was called "partnership of good reputation." As one legal scholar
explained:
As for the credit partnership, it is also called the "partnership
of the penniless" (sharika al-mafalis). It comes about when two
people form a partnership without any capital in order to buy
on credit and then sell. It is designated by this name partnership
of good reputations because their capital consists of their