Monday, May 3, 2010

Ribbit, borrowing/lending with interest

Today is the 19th of Iyar, 5770 (34 days of Omer. 4 weeks, 6 days)

There are some things which would not technically qualify as Ribbit, yet Chakhamim still forbade them because they are loopholes (“Abaq Ribbit”) that people may come to abuse. With these loopholes, the apparent objective of the Tora—that all Jews rely on each other financially when they need, without worrying about interest—would be evaded.

Some examples follow: It is forbidden to lend money in the form of an overpriced object.
Illustration: Nick asks Walter for a loan of $100. Walter suggests: “I don’t have $100 but I could ‘lend’ you my watch that is worth $100. Tomorrow you can sell it back to me for $95.”

Although this is not, strictly speaking, “Ribbit” it is nonetheless forbidden. It is likewise forbidden to “lease” cash. Leasing/renting objects is clearly permitted; however, because this can obviously serve as a loophole to evade the laws (and objectives) of Ribbit, Chakhamim forbade renting coins or bills.

Illustration: Nick needs to borrow $100. Walter tells him: “I will not ‘lend’ you the money. I will instead ‘rent’ you this $100 bill, for $5. You will return it to me when your ‘lease’ ends a month from today.”

Nick would really be paying $105 for a loan of $100. This is forbidden.

Note: the laws of “Ribbit” are very complex, especially in today’s corporate world of sophisticated financial and legal structures. Ours is a basic overview of the Halakha as found in Maimonides’s Mishne Tora and in Shulchan ‘Arukh. Please consult your rabbi with any practical questions (Halakha leMa’ase).