Loans and interest in Judaism
Encyclopedia
The combination of loans and interest, in Judaism
, is a complicated and detailed subject. The biblical Hebrew
terms for interest
are neshekh (Heb.
: נשך), literally meaning a bite, and marbit/tarbit (Heb.
: מרבית/תרבית), which specifically refers to the gain by the creditor
; neshekh referred to interest that was charged by deducting it from the loan
ed money itself, before the loaned money was handed over to the debtor, while marbit/tarbit referred to interest that was charged by adding it to the amount due to be repaid. The word marbit/tarbit, which referred to the form of interest more familiar in modern times, became ribbit (Heb.
: ריבית), in later Hebrew, and hence in modern Hebrew. Similar to the Arabic word Riba
used in the Quran.
The Torah
and Talmud
encourage the granting of loan
s, but only if it doesn't involve interest, with certain exceptions. Charging interest is classed in the Book of Ezekiel
as being among the worst sins, and is forbidden according to Jewish law
. The Talmud dwells particularly on Ezekiel's condemnation of interest, where Ezekiel denounces it as an abomination, and metaphor
ically portrays usurers
as people who have shed blood.
expresses regulations against the charging of interest in the , and . In Leviticus loans themselves are encouraged, whether of money or food, emphasizing that they enable the poor to regain their independence, but, like the other two places in the Bible, forbids the charging of interest on the loan. All three places state that the charging of interest is exploitative. In Exodus and Deuteronomy it is clear that it would be acceptable to charge interest on any loan to a non-Jew.
Evidently the concept of secured loan
s existed, as Exodus expressly prohibits using a particular garment as the security. The garment in question was a large cloth square, which the poor used for sleeping within, and hence the garment was needed to survive the cold nights; had it been offered as security, then this would have put at risk the very life of the debtor. The Deuteronomic verse expresses a similar concern for the security of the debtor's life, but rather than prohibiting a particular garment from becoming the security for a loan, prohibits instead the use of a millstone
. The millstone was used to make flour
, and hence would be required for the manufacture of bread – a staple food among the poor; had the millstone been offered as security, the debtor would have been at risk of starvation.
. These societies regarded inanimate matter as alive, like plants, animals and people, and capable of reproducing itself. Hence if you lent 'food money', or monetary tokens of any kind, it was legitimate to charge interest. Food money in the shape of olives, dates, seeds or animals was lent out as early as c. 5000 BC, if not earlier. ... 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 Sumer
ians, loans were usually given with interest attached, at the rate of 20% per annum; this interest rate is almost always the one stated in surviving Sumerian contract tablets, and was evidently still well known in first century Judaism, as it is the first interest rate to which the Babylonian Talmud refers. 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 contract 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.
carefully tries to prevent evasion of the scriptural injunction against usury, even forbidding moral usury, rather than 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
; due to the Talmud's figurative interpretation of the lifnei iver
regulation, it even regards any witnesses to usury contracts, as well as the scribe writing the contract for the parties, to be as culpable for usury as the lender and debtor themselves.
The Mishnah states that it is not permissible to withhold the whole of something, such as a field, for which part of the selling price has already been paid, because any income arising from possession of the entity would effectively be interest on the outstanding amount. However, the Mishnah does permit the refusal to hand over something for which only partial payment has been received, if it had been sold on the terms that payment would be made by a certain date, and if that date has passed; 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 proven to be lying and the correct repayment date to be different, then, 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. The Mishnah also counts gifts, which aim to encourage the offering of loans, to be a form of interest, paid in advance; similarly, gifts given in thanks for a loan, are another form of interest, according to the Mishnah, even if the loan is repaid when the gift is offered. It even goes so far as to forbid the loaning of things other than money, since by the time the loan had to be repaid, the market value of the loaned thing could have risen, which effectively constituted interest; 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.
According to the Mishnah, if a debtor has paid interest to their lender, it can be reclaimed if it is a form of interest explicitly prohibited by the biblical regulations, but not if it is only prohibited by the Mishnah itself; a dissenting view is, however, expressed by the Mishnah, stating that even the biblically prohibited forms of interest cannot be reclaimed legally. The Mishnaic justification given for the latter view is that the biblical text invokes divine vengeance against usurers, and civil action cannot be launched against someone under the penalty of death; 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.
.
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 loan something to another, and buy it back from them at a reduced price (the purchase, of course, is independent of the loan); the Mishnaic regulations do not prevent the lender from requiring the full value of the loaned thing to be returned, and hence allows the lender to make a profit from the difference between the reduced price and the actual worth of the loaned thing. Another significant loophole in the law was the biblical permission to charge interest on loans to non-Israelites, since this made it possible for an Israelite to charge interest on a loan to another Israelite, by making the loan through a third party who wasn't an Israelite; interest could be charged on the loan to the non-Israelite, who could then loan the money to the other Israelite at a similar rate of interest.
, 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. Of course, when a non-Jew was involved, Maimonides argues that interest could 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..
The Shulchan Aruch
, a 16th century text that was published after the writings of Maimonides, and which is viewed by the majority of Orthodox Judaism
as being authoritative, expresses a different view on interest, stating that it is allowable nowadays (i.e. in the Middle Ages) to lend on interest to non-Jews. This text also records an exemption from the additional rabbinic restrictions for charities, such as orphan
s 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 which is enforceable – if it covers the interest separately, then the interest part isn't enforceble, and if it combines the interest and capital into a single sum, then 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, then the ward may keep the interest and isn't obliged to return it. The Shulchan Aruch even states that the courts can only compel the restoration of interest by flogging the lender until they are willing to return the amount, thus if the lender died before the interest was returned, the lender's heirs were allowed to keep the money.
The early Christian Church, for reasons connected to the New Testament
, declared that any usury was against divine law, preventing pious, and outwardly pious, Christians from using capital for mercantile purposes; in 1179, Pope
Alexander III
excommunicated
usurers, which in that period was seen as an extremely harsh punishment. However, Canon Law
was not regarded by medieval society as having any authority over Jews, and thus Christian monarchs looked to the Jews to supply capital to them; in many European countries
, medieval civil law
also allowed the monarchs to automatically inherit any remaining income and property that had been acquired by usury, upon the death of the Jewish usurer involved. Medieval European monarchs thus supported the Jews, and suppressed any attempts to convert them to Christianity, since it would deprive the monarch of potential income; in England and France, the monarchs demanded compensation from the church for every Jew that was converted, and, until 1281, the English monarch had the legal right to claim half the property of any Jew that converted to Christianity.
The Jewish usurers had no competition in medieval Christian lands, and could charge very high interest; the legal limitations imposed were particularly generous in many countries:
The loans were generally secured, and nearly anything could be used as security, the main exception being sacred objects belonging to the Christian Church; the use of such sacred objects for security was punished in law, as early as 814, when the punishment was made to be the confiscation of property. The huge size of the interest rates that were permitted, together with the effect of compound interest
, meant that if the loan wasn't quickly repaid it would soon become unmanageable, and the security would be lost to the usurer; for example, an abbot
in 1173 borrowed 40 marks
from Benedict the Jew, and seven years later, the amount to be repaid had grown to £880.
The papacy protested against the usury of the Jews, with Eugenius
declaring that all interest charges were null and void if the debtor went on a crusade, and Innocent XIII calling upon all Christian princes to demand that the interest was returned; Louis IX of France
and Edward I of England
answered the call, in 1254 and 1275 respectively, and tried to influence the Jews within their kingdom away from usury, but without effect. Then, in the middle of the 13th century, groups of Italian Christians, particularly the Cahorsins and Lombards
, invented legal fiction
s to get around the ban on Christian usury; for example, one method of effecting a loan with interest was to offer money without interest, but also require that the loan is insured against possible loss or injury, and/or delays in repayment (see contractum trinius
). The Christians effecting these legal fictions became known as the pope's usurers, and reduced the importance of the Jews to European monarchs; later, in the Middle Ages, a distinction was drawn between things which were consumable (such as food and fuel) and those which were not, with usury being pemitted on loans involving the latter.
By the later Middle Ages, Christian Merchants who lent money with interest were without opposition, and the Jews lost their privileged position as money-lenders; from the 15th century, Jews were mainly found as dealers in second-hand clothing, since European society was religiously prejudiced against them, permitting them few other forms of income. Despite this, the Jews' reputation for usury remained well into the 20th century, and the stereotype
often had serious consequences for them.
Judaism
Judaism ) is the "religion, philosophy, and way of life" of the Jewish people...
, is a complicated and detailed subject. The biblical Hebrew
Hebrew language
Hebrew is a Semitic language of the Afroasiatic language family. Culturally, is it considered by Jews and other religious groups as the language of the Jewish people, though other Jewish languages had originated among diaspora Jews, and the Hebrew language is also used by non-Jewish groups, such...
terms for interest
Interest
Interest is a fee paid by a borrower of assets to the owner as a form of compensation for the use of the assets. It is most commonly the price paid for the use of borrowed money, or money earned by deposited funds....
are neshekh (Heb.
Hebrew language
Hebrew is a Semitic language of the Afroasiatic language family. Culturally, is it considered by Jews and other religious groups as the language of the Jewish people, though other Jewish languages had originated among diaspora Jews, and the Hebrew language is also used by non-Jewish groups, such...
: נשך), literally meaning a bite, and marbit/tarbit (Heb.
Hebrew language
Hebrew is a Semitic language of the Afroasiatic language family. Culturally, is it considered by Jews and other religious groups as the language of the Jewish people, though other Jewish languages had originated among diaspora Jews, and the Hebrew language is also used by non-Jewish groups, such...
: מרבית/תרבית), which specifically refers to the gain by the creditor
Creditor
A creditor is a party that has a claim to the services of a second party. It is a person or institution to whom money is owed. The first party, in general, has provided some property or service to the second party under the assumption that the second party will return an equivalent property or...
; neshekh referred to interest that was charged by deducting it from the loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
ed money itself, before the loaned money was handed over to the debtor, while marbit/tarbit referred to interest that was charged by adding it to the amount due to be repaid. The word marbit/tarbit, which referred to the form of interest more familiar in modern times, became ribbit (Heb.
Hebrew language
Hebrew is a Semitic language of the Afroasiatic language family. Culturally, is it considered by Jews and other religious groups as the language of the Jewish people, though other Jewish languages had originated among diaspora Jews, and the Hebrew language is also used by non-Jewish groups, such...
: ריבית), in later Hebrew, and hence in modern Hebrew. Similar to the Arabic word Riba
Riba
Riba means one of the senses of "usury" . Riba is forbidden in Islamic economic jurisprudence fiqh and considered as a major sin...
used in the Quran.
The Torah
Torah
Torah- A scroll containing the first five books of the BibleThe Torah , is name given by Jews to the first five books of the bible—Genesis , Exodus , Leviticus , Numbers and Deuteronomy Torah- A scroll containing the first five books of the BibleThe Torah , is name given by Jews to the first five...
and Talmud
Talmud
The Talmud is a central text of mainstream Judaism. It takes the form of a record of rabbinic discussions pertaining to Jewish law, ethics, philosophy, customs and history....
encourage the granting of loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
s, but only if it doesn't involve interest, with certain exceptions. Charging interest is classed in the Book of Ezekiel
Book of Ezekiel
The Book of Ezekiel is the third of the Latter Prophets in the Hebrew Bible, following the books of Isaiah and Jeremiah and preceding the Book of the Twelve....
as being among the worst sins, and is forbidden according to Jewish law
Halakha
Halakha — also transliterated Halocho , or Halacha — is the collective body of Jewish law, including biblical law and later talmudic and rabbinic law, as well as customs and traditions.Judaism classically draws no distinction in its laws between religious and ostensibly non-religious life; Jewish...
. The Talmud dwells particularly on Ezekiel's condemnation of interest, where Ezekiel denounces it as an abomination, and metaphor
Metaphor
A metaphor is a literary figure of speech that uses an image, story or tangible thing to represent a less tangible thing or some intangible quality or idea; e.g., "Her eyes were glistening jewels." Metaphor may also be used for any rhetorical figures of speech that achieve their effects via...
ically portrays usurers
Usury
Usury Originally, when the charging of interest was still banned by Christian churches, usury simply meant the charging of interest at any rate . In countries where the charging of interest became acceptable, the term came to be used for interest above the rate allowed by law...
as people who have shed blood.
In the Bible
The TorahTorah
Torah- A scroll containing the first five books of the BibleThe Torah , is name given by Jews to the first five books of the bible—Genesis , Exodus , Leviticus , Numbers and Deuteronomy Torah- A scroll containing the first five books of the BibleThe Torah , is name given by Jews to the first five...
expresses regulations against the charging of interest in the , and . In Leviticus loans themselves are encouraged, whether of money or food, emphasizing that they enable the poor to regain their independence, but, like the other two places in the Bible, forbids the charging of interest on the loan. All three places state that the charging of interest is exploitative. In Exodus and Deuteronomy it is clear that it would be acceptable to charge interest on any loan to a non-Jew.
Evidently the concept of secured loan
Secured loan
A secured loan is a loan in which the borrower pledges some asset as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan...
s existed, as Exodus expressly prohibits using a particular garment as the security. The garment in question was a large cloth square, which the poor used for sleeping within, and hence the garment was needed to survive the cold nights; had it been offered as security, then this would have put at risk the very life of the debtor. The Deuteronomic verse expresses a similar concern for the security of the debtor's life, but rather than prohibiting a particular garment from becoming the security for a loan, prohibits instead the use of a millstone
Millstone
Millstones or mill stones are used in windmills and watermills, including tide mills, for grinding wheat or other grains.The type of stone most suitable for making millstones is a siliceous rock called burrstone , an open-textured, porous but tough, fine-grained sandstone, or a silicified,...
. The millstone was used to make flour
Flour
Flour is a powder which is made by grinding cereal grains, other seeds or roots . It is the main ingredient of bread, which is a staple food for many cultures, making the availability of adequate supplies of flour a major economic and political issue at various times throughout history...
, and hence would be required for the manufacture of bread – a staple food among the poor; had the millstone been offered as security, the debtor would have been at risk of starvation.
Historic Context
Most early religious systems in the ancient Near East, and the secular codes arising from them, did not forbid usuryUsury
Usury Originally, when the charging of interest was still banned by Christian churches, usury simply meant the charging of interest at any rate . In countries where the charging of interest became acceptable, the term came to be used for interest above the rate allowed by law...
. These societies regarded inanimate matter as alive, like plants, animals and people, and capable of reproducing itself. Hence if you lent 'food money', or monetary tokens of any kind, it was legitimate to charge interest. Food money in the shape of olives, dates, seeds or animals was lent out as early as c. 5000 BC, if not earlier. ... 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 Sumer
Sumer
Sumer was a civilization and historical region in southern Mesopotamia, modern Iraq during the Chalcolithic and Early Bronze Age....
ians, loans were usually given with interest attached, at the rate of 20% per annum; this interest rate is almost always the one stated in surviving Sumerian contract tablets, and was evidently still well known in first century Judaism, as it is the first interest rate to which the Babylonian Talmud refers. 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 contract thus has characteristics of both a loan
Loan
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower....
and a trust
Trust law
In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...
, 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
Code of Hammurabi
The Code of Hammurabi is a well-preserved Babylonian law code, dating to ca. 1780 BC . It is one of the oldest deciphered writings of significant length in the world. The sixth Babylonian king, Hammurabi, enacted the code, and partial copies exist on a human-sized stone stele and various clay...
contains regulations attempting to govern the use of these contracts.
In Classical Rabbinical Literature
The MishnahMishnah
The Mishnah or Mishna is the first major written redaction of the Jewish oral traditions called the "Oral Torah". It is also the first major work of Rabbinic Judaism. It was redacted c...
carefully tries to prevent evasion of the scriptural injunction against usury, even forbidding moral usury, rather than 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
Causative
In linguistics, a causative is a form that indicates that a subject causes someone or something else to do or be something, or causes a change in state of a non-volitional event....
; due to the Talmud's figurative interpretation of the lifnei iver
Lifnei iver
The Hebrew phrase "before the blind" is a way of referring to the concept of a stumbling block in rabbinical texts. The origin comes from the Hebrew Bible where Leviticus instructs "Thou shalt not curse the deaf, nor put a stumblingblock before the blind , but shalt fear thy God: I am the ...
regulation, it even regards any witnesses to usury contracts, as well as the scribe writing the contract for the parties, to be as culpable for usury as the lender and debtor themselves.
The Mishnah states that it is not permissible to withhold the whole of something, such as a field, for which part of the selling price has already been paid, because any income arising from possession of the entity would effectively be interest on the outstanding amount. However, the Mishnah does permit the refusal to hand over something for which only partial payment has been received, if it had been sold on the terms that payment would be made by a certain date, and if that date has passed; in English Law
English law
English law is the legal system of England and Wales, and is the basis of common law legal systems used in most Commonwealth countries and the United States except Louisiana...
, 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 proven to be lying and the correct repayment date to be different, then, 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. The Mishnah also counts gifts, which aim to encourage the offering of loans, to be a form of interest, paid in advance; similarly, gifts given in thanks for a loan, are another form of interest, according to the Mishnah, even if the loan is repaid when the gift is offered. It even goes so far as to forbid the loaning of things other than money, since by the time the loan had to be repaid, the market value of the loaned thing could have risen, which effectively constituted interest; 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.
According to the Mishnah, if a debtor has paid interest to their lender, it can be reclaimed if it is a form of interest explicitly prohibited by the biblical regulations, but not if it is only prohibited by the Mishnah itself; a dissenting view is, however, expressed by the Mishnah, stating that even the biblically prohibited forms of interest cannot be reclaimed legally. The Mishnaic justification given for the latter view is that the biblical text invokes divine vengeance against usurers, and civil action cannot be launched against someone under the penalty of death; 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.
Exemptions and Evasions
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. However, the Mishnah argues that it wouldn't be counted as usury if the supplier employed the shopkeeper to sell the product, even if the wage was merely nominal, such as a single dry fig; 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 principlesHalakha
Halakha — also transliterated Halocho , or Halacha — is the collective body of Jewish law, including biblical law and later talmudic and rabbinic law, as well as customs and traditions.Judaism classically draws no distinction in its laws between religious and ostensibly non-religious life; Jewish...
.
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 loan something to another, and buy it back from them at a reduced price (the purchase, of course, is independent of the loan); the Mishnaic regulations do not prevent the lender from requiring the full value of the loaned thing to be returned, and hence allows the lender to make a profit from the difference between the reduced price and the actual worth of the loaned thing. Another significant loophole in the law was the biblical permission to charge interest on loans to non-Israelites, since this made it possible for an Israelite to charge interest on a loan to another Israelite, by making the loan through a third party who wasn't an Israelite; interest could be charged on the loan to the non-Israelite, who could then loan the money to the other Israelite at a similar rate of interest.
In rabbinical literature of the Middle Ages
In the view of MaimonidesMaimonides
Moses ben-Maimon, called Maimonides and also known as Mūsā ibn Maymūn in Arabic, or Rambam , was a preeminent medieval Jewish philosopher and one of the greatest Torah scholars and physicians of the Middle Ages...
, 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. Of course, when a non-Jew was involved, Maimonides argues that interest could 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..
The Shulchan Aruch
Shulchan Aruch
The Shulchan Aruch also known as the Code of Jewish Law, is the most authoritative legal code of Judaism. It was authored in Safed, Israel, by Yosef Karo in 1563 and published in Venice two years later...
, a 16th century text that was published after the writings of Maimonides, and which is viewed by the majority of Orthodox Judaism
Orthodox Judaism
Orthodox Judaism , is the approach to Judaism which adheres to the traditional interpretation and application of the laws and ethics of the Torah as legislated in the Talmudic texts by the Sanhedrin and subsequently developed and applied by the later authorities known as the Gaonim, Rishonim, and...
as being authoritative, expresses a different view on interest, stating that it is allowable nowadays (i.e. in the Middle Ages) to lend on interest to non-Jews. This text also records an exemption from the additional rabbinic restrictions for charities, such as orphan
Orphan
An orphan is a child permanently bereaved of or abandoned by his or her parents. In common usage, only a child who has lost both parents is called an orphan...
s 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 which is enforceable – if it covers the interest separately, then the interest part isn't enforceble, and if it combines the interest and capital into a single sum, then the whole bond is unenforceable; similarly, the Shulchan Aruch argues that if a guardian
Legal guardian
A legal guardian is a person who has the legal authority to care for the personal and property interests of another person, called a ward. Usually, a person has the status of guardian because the ward is incapable of caring for his or her own interests due to infancy, incapacity, or disability...
lends something belonging to their ward, and has charged interest on it, then the ward may keep the interest and isn't obliged to return it. The Shulchan Aruch even states that the courts can only compel the restoration of interest by flogging the lender until they are willing to return the amount, thus if the lender died before the interest was returned, the lender's heirs were allowed to keep the money.
In Christianity
New Testament
The New Testament is the second major division of the Christian biblical canon, the first such division being the much longer Old Testament....
, declared that any usury was against divine law, preventing pious, and outwardly pious, Christians from using capital for mercantile purposes; in 1179, Pope
Pope
The Pope is the Bishop of Rome, a position that makes him the leader of the worldwide Catholic Church . In the Catholic Church, the Pope is regarded as the successor of Saint Peter, the Apostle...
Alexander III
Pope Alexander III
Pope Alexander III , born Rolando of Siena, was Pope from 1159 to 1181. He is noted in history for laying the foundation stone for the Notre Dame de Paris.-Church career:...
excommunicated
Excommunication
Excommunication is a religious censure used to deprive, suspend or limit membership in a religious community. The word means putting [someone] out of communion. In some religions, excommunication includes spiritual condemnation of the member or group...
usurers, which in that period was seen as an extremely harsh punishment. However, Canon Law
Canon law
Canon law is the body of laws & regulations made or adopted by ecclesiastical authority, for the government of the Christian organization and its members. It is the internal ecclesiastical law governing the Catholic Church , the Eastern and Oriental Orthodox churches, and the Anglican Communion of...
was not regarded by medieval society as having any authority over Jews, and thus Christian monarchs looked to the Jews to supply capital to them; in many European countries
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
, medieval civil law
Civil law (legal system)
Civil law is a legal system inspired by Roman law and whose primary feature is that laws are codified into collections, as compared to common law systems that gives great precedential weight to common law on the principle that it is unfair to treat similar facts differently on different...
also allowed the monarchs to automatically inherit any remaining income and property that had been acquired by usury, upon the death of the Jewish usurer involved. Medieval European monarchs thus supported the Jews, and suppressed any attempts to convert them to Christianity, since it would deprive the monarch of potential income; in England and France, the monarchs demanded compensation from the church for every Jew that was converted, and, until 1281, the English monarch had the legal right to claim half the property of any Jew that converted to Christianity.
The Jewish usurers had no competition in medieval Christian lands, and could charge very high interest; the legal limitations imposed were particularly generous in many countries:
- in SicilySicilySicily is a region of Italy, and is the largest island in the Mediterranean Sea. Along with the surrounding minor islands, it constitutes an autonomous region of Italy, the Regione Autonoma Siciliana Sicily has a rich and unique culture, especially with regard to the arts, music, literature,...
, under Frederick IIFrederick III of SicilyFrederick II was the regent and subsequently King of Sicily from 1295 until his death. He was the third son of Peter III of Aragon and served in the War of the Sicilian Vespers on behalf of his father and brothers, Alfonso and James...
in 1231, up to 10% per annum - in AragonAragonAragon is a modern autonomous community in Spain, coextensive with the medieval Kingdom of Aragon. Located in northeastern Spain, the Aragonese autonomous community comprises three provinces : Huesca, Zaragoza, and Teruel. Its capital is Zaragoza...
, under the CortesParliamentA parliament is a legislature, especially in those countries whose system of government is based on the Westminster system modeled after that of the United Kingdom. The name is derived from the French , the action of parler : a parlement is a discussion. The term came to mean a meeting at which...
of TarragonaTarragonaTarragona is a city located in the south of Catalonia on the north-east of Spain, by the Mediterranean. It is the capital of the Spanish province of the same name and the capital of the Catalan comarca Tarragonès. In the medieval and modern times it was the capital of the Vegueria of Tarragona...
, up to 20% per annum - in NavarreNavarreNavarre , officially the Chartered Community of Navarre is an autonomous community in northern Spain, bordering the Basque Country, La Rioja, and Aragon in Spain and Aquitaine in France...
, under Philip IIIPhilip III of NavarrePhilip III , called the Noble or the Wise, Count of Évreux and King of Navarre , was the second son of Louis of Évreux and Margaret of Artois and therefore a grandson of King Philip III of France...
in 1330, up to 20% per annum - in CastileKingdom of CastileKingdom of Castile was one of the medieval kingdoms of the Iberian Peninsula. It emerged as a political autonomous entity in the 9th century. It was called County of Castile and was held in vassalage from the Kingdom of León. Its name comes from the host of castles constructed in the region...
, under Alfonso X, up to 25% per annum - in PortugalPortugalPortugal , officially the Portuguese Republic is a country situated in southwestern Europe on the Iberian Peninsula. Portugal is the westernmost country of Europe, and is bordered by the Atlantic Ocean to the West and South and by Spain to the North and East. The Atlantic archipelagos of the...
, under Alfonso IVAfonso IV of PortugalAfonso IV , called the Brave , was the seventh king of Portugal and the Algarve from 1325 until his death. He was the only legitimate son of King Denis of Portugal by his wife Elizabeth of Aragon.-Biography:...
in 1350, up to 33.33% per annum - in France, under Philip Augustus, up to 43.3% per annum
- in England, under King JohnJohn of EnglandJohn , also known as John Lackland , was King of England from 6 April 1199 until his death...
, up to 86.6% per annum
The loans were generally secured, and nearly anything could be used as security, the main exception being sacred objects belonging to the Christian Church; the use of such sacred objects for security was punished in law, as early as 814, when the punishment was made to be the confiscation of property. The huge size of the interest rates that were permitted, together with the effect of compound interest
Compound interest
Compound interest arises when interest is added to the principal, so that from that moment on, the interest that has been added also itself earns interest. This addition of interest to the principal is called compounding...
, meant that if the loan wasn't quickly repaid it would soon become unmanageable, and the security would be lost to the usurer; for example, an abbot
Abbot
The word abbot, meaning father, is a title given to the head of a monastery in various traditions, including Christianity. The office may also be given as an honorary title to a clergyman who is not actually the head of a monastery...
in 1173 borrowed 40 marks
Mark (money)
Mark was a measure of weight mainly for gold and silver, commonly used throughout western Europe and often equivalent to 8 ounces. Considerable variations, however, occurred throughout the Middle Ages Mark (from a merging of three Teutonic/Germanic languages words, Latinized in 9th century...
from Benedict the Jew, and seven years later, the amount to be repaid had grown to £880.
The papacy protested against the usury of the Jews, with Eugenius
Eugenius
Flavius Eugenius was an usurper in the Western Roman Empire against Emperor Theodosius I. Though himself a Christian, he was the last Emperor to support Roman polytheism.-Life:...
declaring that all interest charges were null and void if the debtor went on a crusade, and Innocent XIII calling upon all Christian princes to demand that the interest was returned; Louis IX of France
Louis IX of France
Louis IX , commonly Saint Louis, was King of France from 1226 until his death. He was also styled Louis II, Count of Artois from 1226 to 1237. Born at Poissy, near Paris, he was an eighth-generation descendant of Hugh Capet, and thus a member of the House of Capet, and the son of Louis VIII and...
and Edward I of England
Edward I of England
Edward I , also known as Edward Longshanks and the Hammer of the Scots, was King of England from 1272 to 1307. The first son of Henry III, Edward was involved early in the political intrigues of his father's reign, which included an outright rebellion by the English barons...
answered the call, in 1254 and 1275 respectively, and tried to influence the Jews within their kingdom away from usury, but without effect. Then, in the middle of the 13th century, groups of Italian Christians, particularly the Cahorsins and Lombards
Lombards
The Lombards , also referred to as Longobards, were a Germanic tribe of Scandinavian origin, who from 568 to 774 ruled a Kingdom in Italy...
, invented legal fiction
Legal fiction
A legal fiction is a fact assumed or created by courts which is then used in order to apply a legal rule which was not necessarily designed to be used in that way...
s to get around the ban on Christian usury; for example, one method of effecting a loan with interest was to offer money without interest, but also require that the loan is insured against possible loss or injury, and/or delays in repayment (see contractum trinius
Contractum trinius
A contractum trinius was a set of contracts devised by European bankers and merchants in the Middle Ages as a method of circumventing canon law edicts prohibiting usury...
). The Christians effecting these legal fictions became known as the pope's usurers, and reduced the importance of the Jews to European monarchs; later, in the Middle Ages, a distinction was drawn between things which were consumable (such as food and fuel) and those which were not, with usury being pemitted on loans involving the latter.
By the later Middle Ages, Christian Merchants who lent money with interest were without opposition, and the Jews lost their privileged position as money-lenders; from the 15th century, Jews were mainly found as dealers in second-hand clothing, since European society was religiously prejudiced against them, permitting them few other forms of income. Despite this, the Jews' reputation for usury remained well into the 20th century, and the stereotype
Stereotype
A stereotype is a popular belief about specific social groups or types of individuals. The concepts of "stereotype" and "prejudice" are often confused with many other different meanings...
often had serious consequences for them.