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Ribis: A Halachic Anthology
Rabbi Joseph Stern

The -- Its Development and Structure

Rabbinical leadership, cognizant of the need for a steady flow of funds and a healthy investment climate so that Jewish businesses might thrive, always sought to structure business deals so as to obviate any Ribis concerns.

A. Penalty for Late Payment

The Mordechai proposed structuring every loan as a straight-forward transfer of funds, where the creditor can only demand that the principle be repaid. However, if the loan is not paid promptly then a penalty (equivalent to the amount of the Ribis) may be levied. This scheme was not widely accepted because of the widespread opinion (shared by the Shulchan Aruch) that even a penalty is a biblical violation of Ribis.

B. Heter Iska - Half Loan, Half Investment

This approach called for establishing an investment company whereby the debtor serves as a trustee for half the funds while the other half is granted as a loan. The profits and losses are divided equally. However, it is mandatory to pay the debtor at least a token fee for his services as a trustee. If not, he is managing the creditor funds in return for a loan, a clear incidence of Ribis. Often, clauses are inserted in the contract () concerning the debtor's management of the funds. The contract further stipulates that the debtor must swear in case of any dispute regarding the amount of profit earned and two witnesses must certify any losses. However, if the debtor forwards to the creditor a certain sum (equivalent to the amount of "interest"), the above requirements are waived. (Some authorities permit specifying a sum to be paid monthly, others only a fixed lump sum payment.) This format, with minor variations, serves as the basis for most contracts of Heter Iska in contemporary times. Rav Englander insists that if specific sums are mentioned in an Iska document, only those sums may be collected by the creditor. For example, the creditor depositing money in a Jewish bank (assuming a bank requires a Heter Iska) may not accept gifts offered by the bank unless they are specified in the Heter Iska.

C. A Revolving Fund

The Chochmas Adam favors another format of Heter Iska. He advocates a contract structuring the transaction as a deposit - whereby the "debtor" would be no more than a trustee and after the desired "interest" would be earned, the funds would be converted into an outright loan. As in the previous instance, the trustee must receive compensation for his efforts. However, the Vilna Gaon and Rabbi Yaakov of Lisa opposed this procedure.

D. Trusteeship or a Rental of Fund

Rav Breish, while defending the traditional Heter Iska structure for transactions between individuals, feels that it is not feasible for lending operations of Jewish banks. Firstly, it is impractical for every borrower to receive a fee for his trusteeship of the bank's funds. Furthermore, the interest is paid in monthly or quarterly installments, rather than in a lump sum, a controversial procedure.

C. Heter Iska for a Mortgage

Rav Moshe Feinstein suggests an form specially designed for financing a mortgage. He advocates that the seller retain partial sovereignty over the home and merely rent out that part. The "interest" then will be construed as rental payments, not as Ribis.

D. Contemporary Concerns

As business conditions change, questions have arisen regarding the practicality of the traditional . The Chelkas Yaakov defends this practice and answers effectively most concerns that have arisen.
  1. ) Isn't the a - a devious scheme to counteract the Ribis law? Rav Breish responds that we find ample precedent for such a in the sale of Chametz and of a first born animal to a Gentile. On the contrary, even those who dispute some aspects of the sale of chametz (e.g. selling animal feed along with the animals) will accept the
  2. ) Often the debtor or creditor are not observant Jews and don't intend to comply with the terms of the . Despite the opinion of many authorities that both parties must observe the Ribis laws for an to be effective, Rav Breish and the Minchas Yitzchak permit it if necessary even for non-observant Jews (Rabbi Breish refers to the famous statement of Rambam that ultimately every Jew seeks to do right, it being only temporary passion that causes him to disregard halacha.)
  3. ) Few, if any, deals are true investment deals, but rather outright loans. Often, the money is lent to people who are not even remotely familiar with financial matters (e.g. teachers, domestic help). Rav Breish proves that not all of these factors invalidate a .
  4. ) May a be written once and apply for all forthcoming transactions (an approach favored by many Polish rabbinic authorities)? The Minchas Yitzchok opposes any such advance requiring a separate contract for each deal.


Several salient themes should be gleaned from our discussion.
  1. ) Virtually any type of financing scheme, if conducted between Jew and Jew, may involve Ribis. Careful consideration should be given to the Ribis ramification prior to structuring a transaction.
  2. ) If at all possible, should be sought for any commercial transaction that may involve Ribis.
  3. ) Where such an arrangement is not feasible, rabbinic counsel must be sought.

He who never collects interest will never suffer financial reverses.

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