I'm taking a course on US-Middle East relations, and my professor blamed some of the relative economic underdevelopment of the Ottomans on the lack of banking institutions and the difficulty of financing business. I am curious as to the differences between banking in the Ottoman Empire and in Western Europe, whether these differences are in any way related to Islamic usury restrictions, and whether a lack of banking institutions is a commonly accepted factor in the relative lack of development found in the Ottoman Empire.
First of all, I am on mobile, so I have to keep it short. Banking in the Ottoman Empire started pretty late actually, in the 19th century. Up until the 19th century, the Ottoman Empire was politically against foreign indebtment. The ottomans had tried to cope with fiscal deficit by taking loans from Venetian and Genoese moneylenders who resided in Galata, Istanbul. However, as the fiscal deficit grew larger and larger every year, the loans taken from the Venetians and the Genoese did not suffice and the plans to establish a bank started. The first bank was established in 1847 by two bankers from Galata with the crown's patronage. The bank's name was Bank-ı Dersaadet or Banque de Constantinople. The bank's main aim was to organize the foreign debts. As a result of economical problems the Crimean war brought about, the Ottoman Empire took its first foreign debts in 1854, around 8 million pounds in total and 5.5 million pounds in 1855. This urged the Ottoman Empire to establish a state bank which would deal with foreign loans and credits with prerogatives. The first state bank (the Ottoman Bank) whose headquarters was based in London was opened in 1856 in the supervision of British diplomat Layard. However, the Ottoman Bank did not succeed to meet the expectations. The Ottoman Bank was closed in 1863. The Ottoman Bank was transformed into Bank-ı Şahane-i Osmani with the help of the French financiers. The agreement with the French included these articles: 1- The bank is a state bank. 2- The bank has to abide by the Ottoman law in all its operations. 3- An Ottoman minister assigned by the crown was to investigate the bank.
With British, French and Ottoman partnership, Bank-ı Şahane-i Osmani, or Osmanlı Şahane Bankası (Imperial Ottoman Bank) operated from 1863 to 1924. The French and British presence in the organization of the bank had negative effects in its operations during WW1 as it was viewed as an enemy corporation by the public and as a result, the French and British managers of the bank had to resign. In the first two years of the republic, the bank continued to operate until the establishment of Türkiye Cumhuriyeti Merkez Bankası in 1924.