What is Ribbis?

KEY TAKEAWAYS
 

  • In Judaism, ribbis refers to interest charged on loans or deposits.

  • Religious practice forbids giving and receiving ribbis, even at low interest rates.

  • A Heter Iska, Is the accepted work around designed to avoid conventional interest.

“Ribbis” means interest.  Under Jewish law, lending or borrowing on interest is just not kosher, the same way eating pork isn’t kosher.
 
Ribbis comes into play whenever any amount of money is loaned by anyone to anyone.  Under the rules of ribbis, any amount of money added to the principal amount—even less than a penny or the equivalent of a penny—constitutes interest, and is therefore prohibited by Torah law.
 
Prohibitions violated by lenders
With any interest-bearing loan, a lender would be in violation of five Torah laws:

  1. “You shall not behave toward him as a lender;” and

  2. “You shall not impose interest upon him” (Exodus 22:24).

  3. “You shall not take from him interest or increase…” (Leviticus 25:36).

  4. “You shall not give him your money with interest,” and

  5. “Nor shall you give your food with increase” (Leviticus 25:37).

 
Additionally, an interest-charging lender would be in violation of Leviticus 19:14, “You shall not place a stumbling block before a blind person,” by virtue of causing the borrower to pay ribbis.
 
Prohibitions violated by borrower
With any interest-bearing loan, a borrower would be in violation of two Torah laws:

  1. “You shall not give interest to your brother, [whether it be] interest on money, interest on food or interest on any [other] item for which interest is [normally] taken” (Leviticus 23:20); and

  2. “But to your brother you shall not give interest…” (Leviticus 23:21).

 
Additionally, an interest-paying borrower would also be in violation of Leviticus 19:14, “You shall not place a stumbling block before a blind person,” by virtue of causing the lender to collect ribbis.
 
Prohibitions violated by third party
Furthermore, under the halachos (Torah-based Jewish laws) of ribbis, any party to an interest-bearing loan—such as a broker, witness, signatory, advocate, attorney, contract-writer or guarantor—would likewise be in violation of:

“You shall not impose interest upon him” (Exodus 22:24); and

Likewise, any facilitator of such loans, including brokers and advertising firms, would also be in violation of “placing a stumbling block before a blind person.”
 
Defined ribbis
Ribbis ketzutzah (defined ribbis) refers to Torah-prohibited ribbis.  Ribbis prohibited at the Torah level of halachah carries two definitions:

  1. It must involve interest added to an actual monetary loan, not to the purchase or sale of goods or services, or to any property-rental transactions between landlords and tenants; and

  2. It must involve interest that is applied either immediately at the time a loan is made, or at any later date and time at which the loan’s term is extended.

 
Residual ribbis
Avak ribbis (residual ribbis) refers to every other type of interest prohibited not by the Torah but by the Rabbanan (historical rabbinical authorities)—for example, interest-bearing purchases or sales of good or services, or landlord/tenant property rental transactions.
 
Similarly, avak ribbis also includes sa’ah b’sa’ah (measure for measure) transactions.  For example, if you borrow an amount of physical merchandise that’s worth $100 at the time of borrowing, you’re only obligated to repay the actual amount of physical merchandise that was borrowed, even if that same amount has risen in worth to anything more than $100. (This would apply to such commodities as spices, whose prices regularly rise or fall.)  Charging the current worth of the merchandise constitutes avak ribbis, and is therefore prohibited under rabbinical law.
 
Preceding and pursuant ribbis
Ribbis mukdemess oom’ookheress (preceding or pursuant ribbis) is another type of ribbis prohibited by the Rabbanan.  It has two defining parts:

  1. A borrower may not give a lender any gift of any value before taking a loan—because it constitutes interest on the loan. 

  2. A borrower may not give a lender any gift of any value after taking a loan (including after repaying a loan) —because it constitutes interest on the loan.

 
Verbal ribbis
Ribbis devarim (literally, “ribbis of words”) is yet another type of ribbis prohibited by the Rabbanan.  It is defined by a borrower giving a lender any verbal statement that carries any value—for example, the “mishebeirach” prayer for another’s good fortune that is formally recited in synagogues.
 
Lending money at interest to a non-Jew
Torah law only prohibits interest-bearing loans between two Jewish parties; loans with interest to non-Jewish borrowers are permitted. 
 
Jews borrowing from non-Jews / non-Jews borrowing from each other
According to halachah, a Jew may take an interest-bearing loan from a non-Jew.  Likewise, according to the Noahide Code (halachah for non-Jews), a non-Jew may take an interest-bearing loan from another non-Jew.

The severity of the prohibition
The Torah is replete with statements that communicate the extreme severity of the ribbis prohibition. 

  • As a person involved in a ribbis transaction can transgress as many as six Torah prohibitions.

  • Talmud: One who lends or borrows with interest denounces the G-d that took the Jewish people out of Egypt (Bava Metzia 71a).

  • One who borrows or lends with ribbis is cursed that his assets dwindle (ibid).

  • Yechezkel (18:6-17) equates ribbis with the three cardinal sins and the Talmud (Bava Metzia 61b) equates it with murder.

  • One who lends with ribbis will not rise at techiyas hameisim (Pirkei D’Rabbi Eliezer 33).


What is a “Heter iska”?

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