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The Torah Learning Library of Yeshivat Chovevei Torah

What’s the Interest in Lending?

by Rabbi Jacob Siegel (Posted on February 7, 2024)
Topics: Mishpatim, Sefer Shemot, Torah

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Shortly after emerging from slavery in Egypt, B’nai Yisrael stand together at the foot of Mount Sinai and receive the Torah. They are instructed on a set of ethical precepts for society. Following an exhortation to care for needy community members, widows and orphans, the Torah in this week’s parasha records: “If you lend money to My people, to the poor among your people, do not act like a creditor toward them; do not take any interest from them”(Shemot 22:24).

The Torah does not seem to view interest as inherently immoral; it is merely inappropriate for two members of “your people” to charge it to each other. Why? On the one hand, what is so bad about charging interest? And on the other hand, if it is problematic, why not prohibit all interest to anyone?

There are two primary ways we can understand this prohibition: spiritual and practical.

Spiritually, charging interest to a fellow community member leads me away from the Divine. Our possessions are not truly ours; they belong to God. I am unlikely to forget the Divine source of my possessions while tending a tree dependent on heavenly rain and its own miraculous process of budding and flowering. The moment I am most likely to forget the Divine origins of my possessions is the moment when my own money seems to generate more money for me with no Divine intervention.

The Turei Zahav, writing in the 17th century, points out that someone who chooses to lend at interest despite the prohibition on doing so is demonstrating that they think they know better than God. The person argues, “if only God had known how much profit I could earn.” They may even see themselves as righteous: “if only God had known how much an interest-bearing loan could help this poor person.” These misguided justifications chip away at the foundations of faith that underpin Judaism’s vision of economic justice.

From this angle, the prohibition on interest is a spiritual test. Indeed, the Jewish legal codes group charging interest with transgressions like denying the fundamental principles of Jewish faith, denying the liberation of the Children of Israel from Egypt, and even denying the divinity of God. In the Shulchan Aruch, the laws concerning usury are not in the volume dedicated to economic issues (choshen mishpat) but in the volume dedicated to spiritual issues (yoreh de’ah), alongside keeping kosher and avoiding idol worship. This is also why Judaism makes no distinction between interest rates—a loan at 2 percent interest is just as prohibited as a loan at 50 percent interest.

On the other hand, we can understand the prohibition on interest as a practical communal norm, a way to sustain society. Once we are already considering a loan to help a vulnerable or needy person, we ought to avoid charging interest, because interest would undermine the purpose of such welfare. This might be why the prohibition applies to community members with whom one shares a social contract, but not to strangers (non-Jews) in what are likely one-off transactions.

Interest has a particular quality of compounding, of starting so small that we can barely feel it but then growing so quickly it overwhelms human relationships. The Sefer HaChinukh notes that God desires a developing and functioning society and so “commanded to remove this obstacle from their path, that one should not swallow up the wealth of his friend without his [even] feeling it, until he finds his house empty of all good. As that is the way of interest, and the matter is well-known.”

In other words, interest is not bad, and it is in fact legitimate to charge interest to strangers. But a community cannot support its needy through loans, cannot ensure loving and generous human relationships, cannot be sustainable on this earth, with a norm of interest.

More broadly, from a Jewish perspective, economic justice requires the lender, who has more power, to avoid abusing that power. If one wants to invest in a business venture, one ought to fairly share the risks involved. As my teacher Rabbi Yitz Greenberg puts it, on the one hand, “the Gemara, the tradition, the halakha, accepts the idea of ‘general business practice.’ And in fact, as we heard several different ways, profit motive is legitimate; self-interest is legitimate.” On the other hand, “the profit motive should not be absolute.” It would be all too easy for a powerful lender to demand financially exploitative terms while forcing the borrower to shoulder the entire risk of loss.

May we all be inspired this Shabbat to work toward a world of fairness and economic justice, where nobody abuses their financial power to exploit others.