Loans and interest in Judaism

The Torah expresses regulations against the charging of interest in , , and . In Leviticus, loans themselves are encouraged, whether of money or food, emphasizing that they enable the poor to regain their independence. Like the other two places in the Bible, the charging of interest on the loan is forbidden. Food money in the shape of olives, dates, seeds, or animals was lent out as early as c. 5000 BCE, if not earlier, and records indicate rates of 10–25 percent for silver and 20–35 percent for cereals. Among the Mesopotamians, Hittites, Phoenicians, and Egyptians, interest was legal and often fixed by the state. Among the Sumerians, loans were usually given with interest attached, at the rate of 20% per annum; A more mutually profitable arrangement existed in Sumerian law, by which a lender and a debtor make contractual arrangements to become partners in a business venture, with the lender agreeing to invest in the venture, and the debtor agreeing to manage the venture; the bond thus has characteristics of both a loan and a trust, as the lender's financial share in the venture is effectively the return on the loan, and the debtor's financial share in the venture is effectively a wage. The Code of Hammurabi contains regulations attempting to govern the use of these contracts. ==In classical rabbinical literature==

The Mishnah carefully tries to prevent evasion of the scriptural injunction against usury, preferring to forbid moral usury to trying to mitigate the scriptural rules in this area. According to the Talmud, the debtor would be as guilty as the lender, since it interprets one of the biblical verbs referring to usury, namely tashshik, to be in the causative voice; in English Law, the mortgage was invented to take advantage of this exception. If witnesses support a claim that it had been agreed to repay a debt by a certain date, but they are proved to be lying, and the correct repayment date to be a different date, according to the Mishnah, the false witnesses must pay the amount accrued due to the difference in value of the thing between the two dates. The Mishnah forbids the drawing of interest and dividends from investments, arguing that people should instead buy land and draw income from it. likewise, the exchange of labour between two individuals was forbidden by the Mishnah, if the work by one of the individuals would be more laborious than the other. effectively this meant that rabbinical courts made judgements in cases of usury, but refused to enforce them by anything other than physical attacks against the lender's body. Heter Iska The Mishnah forbids arrangements where a supplier gives a product to a shopkeeper to sell in return for a portion of the profit, since it views the supplier as effectively loaning the product to the shopkeeper, while ignoring the fact that the shopkeeper takes on the risk of theft, depreciation, and accidents. this mechanism to permit profit being gained by a lender, in a business transaction between lender and debtor, was formalised as the Heter Iska, literally meaning exemption contract, which worked in exactly the same way as the earlier Sumerian business partnership contract between lender and debtor. Like all contracts, there are sometimes disputes, and the parties may resort to secular courts, running the risk of the court imposing interest, or other conditions which are contrary to Halakhic principles. Other evasions There were also a number of methods of evading the anti-usury laws completely, identified in the Mishnah. One of the simplest methods was for a person to lend something to another and buy it back from them at a reduced price ==In rabbinical literature of the Middle Ages==

In the view of Maimonides, there were certain conditions similar to interest which were permitted. For example, Maimonides states that a person can offer money to a second person attaching a requirement for the second person to give a certain larger amount of money to a third person, or a requirement for the second person to persuade a third person to lend a certain larger amount of money to the first person. When a non-Jew was involved, Maimonides argues that interest should be charged; indeed, Maimonides argues that it was compulsory to charge interest on loans to non-Jews, but he also suggests that such loans should be restricted to being within narrow limits, to avoid the lender becoming so keen on usury that they practice it against other Jews. This text also records an exemption from the additional rabbinic restrictions for charities, such as orphans or poor-funds. Similarly, it allows the borrowing of money on terms involving interest repayments when a life is in danger. In the opinion of the Shulchan Aruch, it is only the return of the capital part of a bond that is enforceable: if it covers the interest separately, the interest part is not enforcible, and if it combines the interest and capital into a single sum, the whole bond is unenforceable. Similarly, the Shulchan Aruch argues that if a guardian lends something belonging to their ward, and has charged interest on it, the ward may keep the interest and is not obliged to return it. The Shulchan Aruch even states that the courts can compel the restoration of interest only by flogging the lender until they are willing to return the amount, known as contempt so if the lender died before the interest was returned, the lender's heirs were allowed to keep the money. ==See also==