Early Efforts to Support Rural Credit
In 1863, Midhat Pasha, who was the Governor of the Danubian Vilayet, prepared an important plan to help the rural population. His idea was to create special “urban banks” that would mainly serve farmers and villagers. At that time, peasants had very limited access to fair credit and were often forced to borrow money from usurers at extremely high interest rates Private Tour Istanbul.
The Turkish Government approved this plan, and several banks were established in the same year. These early institutions were designed to support agriculture and rural trade. One of their most useful features was that farmers were allowed to repay their loans in kind, instead of paying cash. The banks then sold the agricultural products on the market.
Loan Repayment in Agricultural Products
This system was very practical for farmers, who often lacked money but had crops and livestock. By accepting repayment in grain and other products, the banks made borrowing easier and safer for peasants. To further strengthen the financial position of these banks, the authorities introduced a special agricultural tax. This tax required farmers to deliver a small part of their annual produce to the banks, which helped increase their capital over time.
Expansion Across the Empire
As time passed, it became clear that these banks were of great benefit to the rural population. They provided loans at an interest rate of 12 percent, which was far lower than the 30 to 100 percent commonly charged by private moneylenders. Because of this success, the Turkish Government decided to expand the system throughout the empire.
Peasants in all district centers were required to establish similar banks. This reform helped spread access to fair credit and reduced the influence of usurers in many regions.
Use of Profits for Public Benefit
According to the statutes of these banks, the net profits were divided in a socially responsible way. One-third of the profits was used for public works, such as building bridges, roads, fountains, and schools. These projects improved daily life in rural areas. The remaining two-thirds of the profits were added to the capital of the banks, making them stronger and more stable.
Types of Banking Operations
Before the establishment of the Bulgarian Principality, these agricultural banks carried out three main types of transactions. They granted personal loans to individuals, loans secured by securities, and mortgage loans based on land and property. These activities laid the foundation for the later development of the Bulgarian Agricultural Bank, which continued to support agriculture and rural communities after independence.