The First Paper Money in Iran

Abstract

Despite the commonly-held belief among many Westerners, paper money was not first introduced in a European country but in elsewhere in the world. Indeed, it was introduced in Iran almost 700 years ago. The first known reference to this event, in a Persian document, is found in a historical account written by the famous Persian historian Vassaf, and the first such reference in English is in Sir John Malkolm's History of Persia published in 1815. More specifically, and in an article published in 1892, entitled "Banking in Persia," Joseph Robino, the president of the Imperial Bank of Persia, stated that as early as the 13th century, and "long before they [paper money] were thought of in Europe," Iranians had attempted to introduce bank notes in their country. In fact, it was in 1294 A.D., in the midst of a serious financial crisis during the reign of Kaikhatu of the Ilkhanid dynasty, when "nothing in the shape of gold or silver remained in the treasury of the Shah," that the idea of issuing chaw or paper money was proposed by one of the advisors to Kaikhatu's grand vizier. A yerligh, imperial command, was issued in the same year, which ordered all the gold and silver smiths to close up their shops, prohibited the manufacture of gold or silver items and their use in all transactions, and declared that chaw would henceforth be the legal tender in the country. According to Tarikh-e Vassaf [History of Vassaf], the bank note or chaw, for which all gold and silver had to be exchanged, was a rectangular piece of paper, made of the inner bark of the Mulberry tree, on whose top side appeared the names of God, the Prophet and the emperor. The date of the issue and the value of the note appeared in a circle at the center of the note. A note warning all would-be counterfeiters of the dire consequences of their act appeared at the bottom of the note. Tabriz, where the main chaw house was established, was the first city to print these notes which were also printed in a number of other Iranian cities and towns. The popular reaction to the new tender was less than enthusiastic. Many shopkeepers and artisans closed their businesses rather than accept the notes. The notes, therefore, were immediately depreciated and fell to one tenth of their face value. Within days, fearing a full-fledged public revolt and further deterioration of the economy, the royal edict was rescinded and the chaw houses closed down. However, Iran's revolutionary innovation, which did not come to fruition seven centuries ago, eventually helped change the whole concept of banking and commerce of the world.