24. “When you lend money to any of My people, to the poor among you, you shall not be to him as a creditor, nor shall you impose upon him any interest.

25. If you take your neighbor’s [night]garment a s a pledge (collateral), you shall return it to him by nightfall.

26. For that is his only covering; it is his garment for his skin. In what shall he sleep? And it shall come t pass, that if he cries our unto Me, I will hear it, for I am compassionate.”
The word that sets the tone for the entire legal discussion is the word “ami”- my people – which is found in verse 24. God specifically regards those in need of loans as being His special people, to whom He is very close. The lender should regard it as an honor to assist one of God’s people, and must conduct himself accordingly. The phrase “ you shall not be to him as a creditor” is interpreted to mean that the lender is prohibited from reminding the borrower of his dependent status in any way. The borrower is beloved of God, and the lender must bear this in mind. Even a facial gesture on the lender’s part can constitute a violation of this prohibition.

But the most concrete expression of God’s love for the debtor is, of course, the prohibition against the taking of interest. By rabbinical interpretation, not only is the lender prohibited from charging interest, the borrower is prohibited from offering to pay interest. The Torah rejects the entire notion of a loan as a transaction that brings benefit to the lender. According to the Halacha (rabbinical law), a person who either lends, or voluntarily borrows on interest is disqualified from being a witness in court. Such a person is regarded as placing financial gain over obedience to the will of God, and therefore it cannot be assumed that he will give truthful testimony in court, if that testimony would harm his financial interests.

The rabbis considerably expanded the category of “interest”. By rabbinical definition, interest can include considerations aside from cash. (Bava Metzia, Chapter 5, Mishna 2) For example, it is prohibited to allow one’s creditor to live in utilize one’s home or workplace rent-free. It is even prohibited for the debtor to offer space to his creditor at a discounted rent. These are understood to be gestures through which the creditor realizes benefit from the loan he extended, and therefore are defined as “interest” by rabbinical definition.

The question as to the permissibility of lending with interest to people who are not part of the Jewish community, is debated in the Talmud (Bava Metzia 70b – 71a) The Talmud’s discussion is inconclusive, and the post-talmudic rabbis take up the question. Moses Maimonidies, in his great Jewish legal code (Laws of Loans, chapter 5, law 2), rules that it is permissible for a Jew to charge interest of a non-Jew only when and in the amount necessary to provide himself with a basic living. To charge a usurious rate is prohibited. The great rabbis of medieval France and Germany were somewhat more permissive under circumstances in which Jews were barred from most professions, and Jewish communities were singled out for taxation above the ordinary rates. (Commentary of Tosafot to Bava Metzia 70b)

In the sixteenth century, as life became much less agrarian and much more commercial, loans were no longer primarily extended for personal reasons, rather to provide commercial capital. As these kinds of loans were vital for commercial success, and were not the kinds of loans first envisioned by the Torah, efforts were made to find a permissible vehicle for this kind of enterprise. Rabbis in Poland and subsequently in other parts of Eastern Europe, drafted and refined a document called “heter iska”. The essence of this document is to transform the lender-borrower relationship into an investment relationship. The provider of the capital loan becomes a partner in the venture that the borrower will be engaging in, and will share a specified percentage of the realized profits with the lender. This technical redefinition of the loan as an investment, allowed Jewish commercial enterprises to succeed without the laws of interest being violated. The “heter iska” was refined several times to help insure that the lender/investor would not be exposing himself to an unacceptable level of risk, and to insure that some measure of return would be contractually guaranteed. The “heter iska” is ion common use to this day.

Finally, it is important to note that all Jewish communities have Free Loan Societies that preserve both the spirit and the letter of the laws of interest. Often these free loan societies are administered by the local Jewish federations or other community-wide organizations. These societies are the true embodiments of the words of the Torah.

· The biblical source

· The general biblical attitude concerning lending

· Parameters of what constitutes “interest”

· Interest on loans between Jews and others

· Heter Iska

· Free Loan Societies