Yaakov Lev
At the beginning of the twentieth century, Iraq was still a backward country. The most common means of transportation was the horse or donkey and the roads were narrow lanes that were poorly maintained, dusty in summer and muddy in winter.
Most of the men and all of the women were illiterate. The few children who did study were only the males who attended the Khitab (for the Moslems) or Stad (for the Jews). Water for drinking and washing was delivered in leather flasks (Pakka). The economy was condensed to wholesale and retail commerce and the small amount of imports, mostly of textiles, arrived by ship from India. Despite this, the Jews seemed to be involved in financial dealings from the earliest of times. Because wherever there is commerce there is also an inventory which must be financed until such time as the consumer pays for the goods and return the money to the wholesaler via the storekeeper so that the former can repay his debt to the loaner or the small banker.
Shortly after Iraq was captured by the British, they opened three modern bank branches in Baghdad, Basra and Mosul. These branches were founded by financial organizations based in England. The clerks in these banks were, for the most part, Jewish while the managers were British. The managers established general policy, in no small part aided by their Jewish assistants, the most outstanding of whom were: Goorji Lawy at the Ottoman Bank; Abdullah Batat at the Eastern Bank and Yossef Dlomey at the Hashai Bank. At the side of the Jewish clerks were also a few Christians who were sons of prominent families who were employed by the bank in order to attract clients from their communities. Moslems did not work in the banks at all.
However financial dealings for the most part were handled by the sarrafs. Even the large merchants who worked with the banks conducted most of their business with the sarrafs, with the exception of import/export dealings which involved letters of credit outside of Iraq. The banks however, serviced the sarrafs who needed financing as business expanded and Iraq slowly entered into the twentieth century.
The ordinary man, the merchant, the saver, knew his sarrafs and had faith in him. In principal the sarrafs serviced the important people and the landed gentry.
All of the sarrafs, without exception, were Jewish as the Moslems trusted only them. The Moslems would entrust them with their gold coins (for the most part gold Ottoman Lira). They understood each other's language and the Moslems believed in the Jews' honesty and integrity. On the other hand, these distinguished Moslems received from the Jews, honor, respect and attention. It should be remembered that these wealthy Moslems were illiterate and kept in their pockets copper seals upon which their names were written and which they used to sign their names.
In Iraq, and especially in Baghdad, many sarrafs were involved in finance. The outstanding among them were: Kadouri Zilkha who developed into a serious bank with branches in Beirut and Alexandria and who dealt with all aspects of banking; Zion Koby about who it is told that he stopped working with a merchant when he learned that his father once had a cheque returned and Edward Aboudi who was the third in the hierarchy. there were other sarrafs with very large businesses among them two with the name Salman Zilkha.
In this manner the commercial activities were run: the merchants from the outlying towns would come to the center in Baghdad or Basra, and lacking cash money would buy goods by means of a certificate to be paid in two or three months. These certificates were transferred by the merchant who was selling the goods to the importer or wholesaler. The person who needed the cash would transfer the certificate to the sarrafs, after endorsing it of course. The sarrafs whose personal fortune was not sufficient to finance all the needs of his clients would pass on the bundle of notes he received to the bank while performing his rediscount. The wholesaler paid the sarrafs 9-10% (or 5-7% in the times of depression) of the value of the certificate. The sarrafs paid the bank 3-4% and the par between these two sums went into sarrafs pocket.
It should be noted that in Iraq there was a law regarding certificates similar to that in effect in Israel however contrary to the situation in Israel, in Iraq these certificates had great value and meeting the terms of payment was regarding as holy. Woe to the merchant who gave a sarrafs a certificate and on the date upon which it was due the hour of 12 noon passed and it was not paid. Should the note not be paid - the merchant was bankrupt with no chance of a reprieve. It was a death sentence from a financial point of view. It was a cruel policy but it guaranteed absolute respect for the promissory note.
And thus, not only did the establishment of the banks not put an end to the activities of the sarrafs, it helped them prosper and expanded their business.
The bank's financing enabled the expansion of commerce with a gradual increase in the standard of living and modernization of the country.
Until the mid-forties, the Jews had absolute control of the sarrafs in Iraq. Their business grew to a point where the three mentioned above began to operate international banks. Only toward the end of the forties when the Jews became second class citizens did the authorities curb their financial and business activities, and a number of Shiite sarrabs replaced Jewish ones.
However at the same time most of the merchants and the ordinary people including savers began to work directly with the modern banks to which was joined a bank backed by the government of Iraq called the Al Rafiden bank.
The number of Jewish sarrafs decreased with the large Aliyah to Israel and this virtually put an end to this institution.