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NAME

DATE

Economics of History Activity

CLASS

netw rks

Islamic Civilization
Lesson 3 Life in the Islamic World

The Use of Credit in the


Islamic Empire
Background Information

Copyright by The McGraw-Hill Companies.

No matter who led the Islamic Empire, trading was an important economic
activity of the empire. Merchants traded goods to and from Africa, across
the Arabian peninsula to South Asia and in the Mediterranean area. Some
merchants went as far as China. Arabic became the language of business
and trade in much of Asia and Africa. An important business practice that
developed in Muslim trade was the system of credit.
Credit is given by a person or company (the giver) to another person or
company (the receiver). The giver provides goods or services to the
receiver with the trust and understanding that the receiver will pay back
these goods or services in the future.
Today, many students pay for college by using credit. For example, Juan is
accepted at the state university. He does not have the $5,000 to pay for his
classes. He uses the system of credit to get the money he needs. For a fee,
the bank in the town where Juan lives agrees to give him the $5,000. This
is how the process works:
1. Juan fills out an application at the bank. This is also called applying
for a loan. A loan is the same as extending credit. In this
application, Juan agrees to pay back the loan within a period of
time.
2. The bank reviews Juans application and approves it.
3. The bank (or giver) provides Juan (the receiver) with the $5,000
for his tuition.
4. Juan pays his tuition and attends school.
5. Juan graduates and gets a job.
6. Earning a salary, Juan pays back the bank (the giver) the amount
of the loan and any fees for the service.

NAME

DATE

Economics of History Activity Cont.

CLASS

netw rks

Islamic Civilization
Another example is the diagram of buying a television on credit:

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The key word in this definition is trust. Credit relies on trust, or the belief
that the receiver will pay the giver back. Our world economy today could
not function without the system of credit.
Early accounting records show that credit was an important part of the
Muslim world as early as the 700s. The development of the Arabic numeral
system made the tracking of credit easier. Europeans, on the other hand,
only stopped using the complex Roman numeral system in the 1200s.
The system of credit contributed to the expansion of trade. Credit allowed
merchants to do business at a time when regions and empires used many
different kinds of coins. By the late 1100s, influenced by growth in regional
and international trade, credit practices of Muslim trade became the early
elements of a banking system.

Copyright by The McGraw-Hill Companies.

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NAME

DATE

Economics of History Activity Cont.

CLASS

netw rks

Islamic Civilization

Directions Answer the following questions on a separate

piece of paper.

Recall
1.  In what geographical areas did Muslims trade?

2.  What did credit arrangements lead to in the Islamic Empire


by the 1100s?

Critical Thinking
3. Identifying Cause and Effect How did credit help expand
trade?

Copyright by The McGraw-Hill Companies.

4. Making Connections Credit is still used today. Think


about how you, your family, and your friends buy things.
Give two examples of when you or they used credit.