You might have found yourself exploring options for financial help and have looked at options for loans. For Jewish borrowers and lenders that are additional elements to consider, notably Jewish Usury Laws. Read on to find out more.
History of Usury Laws
In many parts of the Torah, it is prohibited for Jews to borrow, lend or be involved in a financial transaction that involves charging interest to another Jew. The term used in Hebrew is ‘ribit’ which loosely translates to ‘increase’.
There are some elements of ribit to consider – most notably that it applies only when both parties are Jewish, regardless of the wealth of either side. A Jew is, however, allowed to take a loan from a non-Jew and can pay interest to them on the loan, in essence enriching them. A Jew is also allowed to lend money to a non-Jew and take interest like loans made outside of usury laws.
It is interesting to examine this law further. As both parties agree to a loan, there is nothing unfair about charging interest on a loan.
After all, loans and interest ultimately help to boost the economy. With loans, businesses are able to grow and make bigger profit, entrepreneurs are able to launch their new products and families with loans are able to have a better home.
Interest creates the incentive for personal and short term loans, and as noted there are proven benefits for both lenders and borrowers.
Despite this, loans between Jews with any amount of interest are totally forbidden. It doesn’t matter what the money is going towards or how wealthy either party is.
Why Is Charging Interest Forbidden?
The reason that interest is forbidden is prevalent in the Torah. Ribit is prohibited between Jews simply due to your fellow Jew being your family. Family members should not help out other family members because of the possibility of gaining interest. In a wider view, the Jewish nation should exist as a cohesive group, where everyone is concerned for everyone else’s benefit.
The ribit laws outlined in the Torah are extensive and fairly complicated, hence usury laws only apply between fellow Jews and do not extend to all people. There are other elements included, for example ribit does not apply only to loans and can also apply to things like rent or purchases.
How Can You Do Business Without Loans?
Commercial activity has developed dramatically and loans have become more prevalent in everyday life. Rabbis therefore established some guidelines for business partnerships (heter iska in Hebrew).
The fixed terms of this means one person will provide money which the other can make a profit which is then shared between both parties. A document must be drawn up and consulted with an authority before this takes place.
Interest Free Loan Organisations For The Working Poor
With usury laws practiced in the community, free loans have also developed to provide interest-free loans to those who qualify.
The Torah suggests a positive response to poverty, and a number of free-loan associations have developed to help marginalized groups who have found it difficult to use more traditional forms of borrowing and banking institutions. By providing loans to the needy without charging interest they embody the spirit of Exodus 22:24.
These organizations have developed to show their commitment to a compassionate and ethical approach to relieving the poor.