Modern finance revolves around interest. Banks and investors dispense cash to individuals and corporations that need it with the expectation that they will receive significantly more in return over time. And, as anyone with a mortgage knows, the longer it takes to repay, the more the lender demands in return. This arrangement, to a large extent, forms the foundation of our entire economic system in developed countries around the world.
If we think about it for a moment, this arrangement seems perfectly fair and reasonable. If I have extra fluid cash lying around, and somebody else needs it to pay his bills while he waits for his new job to begin or for his business to take off, then I am providing a valuable service for which I can rightfully ask for payment. What’s more, lending him the money denies me the opportunity to invest this money in some other profitable venture, and so it seems perfectly reasonable for me to request compensation. Economics is all about the provision of goods and services, and lending money is no less valuable a service than providing food, furniture, appliances, healthcare or plumbing repair. As such, it deserves compensation just like the provision of all other goods and services.
Surprisingly, however, the Torah, towards the end of the Book of Vayikra, forbids charging interest from a fellow Jew: “If your brother becomes impoverished and he falls into straits with you, you shall support him… Do not take interest from him…” (25:35-36). Despite the fact that the lender provides a valuable service and forfeits investment opportunities for the sake of the borrower, and even if the borrower eagerly accepts the terms of interest, both the lender and the borrower violate a Torah prohibition if the loan is given on interest.
In fact, charging interest is not only forbidden, but also constitutes an especially grievous sin.
The Talmud warns that one who charges interest is excluded from tehiyat hametim – the future resurrection. Lest one think that this was said merely as an exaggeration, the Talmud’s remark formed the basis of a striking halachic ruling some two centuries ago. A certain Jewish loan shark died, and the local hevra kadisha (burial society) charged the family an exorbitant sum for a plot in the Jewish cemetery – several times the amount they normally charged. The family was enraged, and they and the hevra kadishadecided to come before Rabbi Akiva Eger to settle their dispute. The great sage heard both sides, and ruled in accordance with the hevra kadisha. He explained that since the deceased was a well-known loan shark who charged large sums of interest from his clients, he would not be included in the future resurrection. As such, whereas burial plots are normally sold for only a limited time – until the resurrection – this man’s burial plot was sold for all eternity, and the hevra kadishathus had every right to raise the price significantly.
The special gravity assigned to this prohibition makes it every more difficult for us to understand what the “fuss” is all about. Isn’t interest perfectly fair and reasonable? Why does the Torah forbid it, and why is it considered such a severe transgression?
Charity – to a Billionaire?
Intuitively, we might view the prohibition against charging interest as part of the Torah’s obligation to care for the poor. If lenders give loans only on interest, it would be all but impossible for most people with financial struggles to recover. More often than not, by the time needy lenders earn enough to pay back what they borrowed, the interest has accrued to large amounts, creating a vicious cycle of poverty. The borrower works hard to earn the money he needs to repay the loan, but the interest keeps growing, so he is constantly in deficit. Therefore, in order to help ensure the possibility of financial recovery, the Torah forbade charging interest and commanded people of means to offer free loans which allow those who struggle the opportunity to regain financial stability.
However, while this explanation might very well represent one aspect of the prohibition against interest, it fails to account for the fact that the Torah forbids lending on interest to anybody, including the wealthy. If a billionaire wants to open a new factory to expand his operations, but all his money is currently locked up in investments or long-term savings accounts, he will naturally turn to lenders – perhaps venture capitalists – for assistance. And, anticipating large profits from his new factory, he will happily agree to pay the investors significant interest on the loan. This arrangement is a win-win for all parties involved. Yet, the Torah forbids charging or paying interest even in such a case. Our sages inferred this law from the Torah’s formulation in the Book of Devarim (23:21): “You shall take interest from the gentile, but you shall not take interest from your brother.” Unlike in the other contexts where this prohibition is introduced, the Torah makes no mention of the borrower’s state of impoverishment. The clear implication is that one may not take interest from any “brother,” poor or rich. The sages thus concluded that although the Torah elsewhere forbids taking interest specifically from the poor, this is only because most borrowers are poor, but the prohibition applies even in cases of wealthy borrowers.
Clearly, then, this law cannot be viewed as a form of charity. A billionaire who owns a successful international chain of stores does not need charity. Even if he needs a loan so he can expand his fortune, this can hardly be considered “charity.” Necessarily, then, we cannot understand the prohibition against interest as intended to assist the underprivileged.
This argument led one of the great Torah commentators, Rav Shlomo Efrayim of Luntshitz (1550-1619), author of the famous Keli Yakar, to a much different approach to understanding the prohibition against interest.
Keeping Faith Intact
It is true that money lenders provide a valuable service for which they should, in principle, receive compensation. However, the Keli Yakar explains, there is one vital difference between money lending and other ventures, a different which can be summed up in a single word: certainty.
As any businessman will tell you, the only thing that is certain in business is uncertainty. So many things can go wrong at any stage of the process that can undermine the entire operation. A successful business depends on a large number of factors. A freak storm can delay the shipment of a large order; a sudden shift in trends can render a product obsolete soon after it hits the shelves; a trusted client can be lured away by a competitor; a factory in the Far East manufacturing the goods can close down or be bought out by a new owner who decides to cancel a profitable standing order. I might even go so far as to say that my job as rabbi is made easier, at least in one sense, by the fact that so many people in our community own businesses. Business owners see very clearly how their livelihood depends on the Almighty, how only Providence ensures a steady flow of customers and that they are satisfied. With so many potential pitfalls lurking all along the road to success, many businessmen find themselves naturally drawn to faith and readily acknowledge Gd’s role in their livelihood.
This is not the case, the Keli Yakar writes, when it comes to money lending. A lender generally gives his loans on collateral, and so his success is all but guaranteed. If the borrower is delinquent, the lender has options for reclaiming his money. He can only win; he cannot lose.
And this is precisely the reason, the Keli Yakar explains, why the Torah does not want us to earn profits by lending on interest. We are never to feel too confident about our financial success and stability. We are to work hard to earn a living, but at the same time to realize at all times that nothing is guaranteed, and that ultimately, our finances are determined only by Gd. It is He – and not any customer or employer – who decides how much money we have and don’t have. For a money lender, the Keli Yakar argues, this belief is difficult to engender and to maintain. He has the collateral in his possession, and he has the borrower under contract. There really isn’t all that much that can go wrong. He feels confident that the money will come in – and this is the problem. The Torah wants us to live with the understanding that our livelihood ultimately depends on Gd alone, and that even while we responsibly tend to our jobs and businesses, we earn nothing that Gd does not want us to earn. And so we are forbidden from lending on interest – an occupation which makes this awareness difficult.
This is why the prohibition applies regardless of the borrower’s financial status. Whether he’s a hungry beggar in need of money for food or a real estate mogul borrowing cash to build a new luxury condominium, the lender still feels confident that he will make money on the deal, and this confidence threatens to undermine his faith in, and sense of dependence on, Gd.
Along these lines, the Keli Yakar explains why the Torah allows lending on interest to non-Jews. A lender is confident in receiving his payment or keeping the collateral only in the case of a Jewish borrower. Given the hostility that other nations had often shown to Jews over the course of their history, Jewish lenders did not feel entirely confident lending money to gentiles, who often had connections and power that the Jew didn’t, and thus could wiggle out of a loan when necessary. The Torah does not discourage loans given on interest under such conditions. It forbids only lending on interest to fellow Jews, due to the overconfidence it can easily produce.
The Keli Yakaradds that this approach explains why the Torah’s prohibition is directed towards both the lender and the borrower. Even if a person is ready and willing to borrow on interest, the Torah forbids doing so. The Keli Yakarexplains that by taking such a loan, the borrower contributes to the lender’s overconfidence and inflated sense of financial security, and so he, too, violates the Torah’s prohibition.
Interest and Shemitah
Additionally, the Keli Yakarexplains on this basis why the Torah introduces this prohibition in Parashat Behar, in the context of the mitzvahof shemitah– the septennial “sabbatical” year.
The law of shemitahrequires farmers in the Land of Israel to put all their agricultural activity on hold for an entire year, every seven years. The modern-day equivalent might be telling a storeowner to suspend his enterprise for an entire year. As soon as the shemitahyear begins, he must open the door to his store and allow anybody to take any merchandise they want, without paying for it. For the next twelve months, he does not do any business. He does not buy or sell any merchandise, and must live on his profits from the previous six years. Then, once the shemitah year ends, he must start his business anew.
To most businessmen, this would sound like financial suicide. But in the case of shemitah, this is not the case at all. The Torah in Parashat Behar explicitly promises farmers that Gd will sustain them and ensure that the land will produce enough food to fill their needs during shemitahand beyond until the new grain is planted and harvested. Shemitahobservance is not suicidal at all; to the contrary, it is the source of great blessing.
Accordingly, the mitzvot of shemitahand interest-free loans very closely relate to one another. Both revolve around the fundamental tenet that our livelihood is provided by Gd. He can sustain us even if we need to close our store for a year, and He can take away our livelihood, Heaven forbid, even as a steady flow of customers stream into the store and leave with full bags of goods. We are to put in our effort, but the outcome depends solely on Gd. This is the message of shemitah, and this is the message of the prohibition against lending on interest.
The Contemporary Message
Today, as many readers are undoubtedly aware, we circumvent the Biblical prohibition against charging and paying interest through a system known as “heter iska.” This system involves a formal legal document that officially transforms the loan into a joint business venture. The lender does not simply lend the money, but rather becomes a legal partner with the borrower. The legal effect of this arrangement is that he may receive interest as his share in the profits, and, secondly, he could, in theory, lose his money if the borrower fails to earn enough money to repay. Several clauses are added to the document that make it extremely unlikely for the lender to lose his money. Nevertheless, the kernel of uncertainty suffices to avoid the prohibition of interest. Anybody who lends money to a fellow Jew or borrows from a fellow Jew must ensure to sign this document in order to comply with the Torah’s laws governing loans.
But beyond the practical application of this law in the form of the heter iska, the broader message rings as true nowadays as ever, if not more so. People today often speak of the ideal of “securing” a livelihood, and of achieving “long-term financial stability.” This refers, of course, to reaching the point where one no longer needs to worry about his family’s finances, as his source of income is steady and guaranteed well into the distant future.
I believe it is important for us to rephrase this goal. Undoubtedly, we can and must do what we can to earn a livelihood, which includes planning for a future of financial success through familiar methods such as professional training, building businesses, saving plans and long-term investments. At the same time, however, we must realize that our livelihood is never truly “secure” or “stable.” Whether one is a salaried employee, business owner or investor, and no matter how much money or assets he currently owns, his financial success can never be taken for granted. As secure and steady as we think our income is, we must always pray to Gd for His continued blessing, and always work to ensure that we deserve it. The Keli Yakarreminds us to be forever mindful of our vulnerability, of the fragility of life, not so we walk around anxious and depressed, but to the contrary, so we find comfort and security in faith in Gd’s boundless grace. The more we recognize just how unstable our condition always is, the more we can appreciate all the gifts we receive from Gd each and every day of our lives, and feel the love and grace that He constantly showers upon us.