In our first column we discussed why the issur of ribbis is far more relevant in Eretz Yisrael than in the Diaspora. In the coming weeks we will discuss various common scenarios and how to prevent transgressing this issur.
The most obvious minefield of ribbis in Eretz Yisrael is banking. When one takes a loan or deposits money in an account which accrues interest, it seems he is doing exactly what the Torah forbids: borrowing or lending with interest. While we may think as a bank as simply safeguarding our money, in reality, by depositing money in an account, we give the bank the right to use the money. This innocuous deposit is really a loan to the bank, payable to the lender at a moment’s notice. Yet we see that everyone has accounts and mortgages. How do we do it?
The prevalent heter used to allow business with Jewish bank is called a heter iska, which almost every bank in Eretz Yisrael has. The basic idea of a heter iska is that the money the account holder deposits in the bank (or part of it), is not meant as a loan, rather as capital for the bank to invest (i.e., an iska). The bank’s investment turns a profit which naturally belongs to the original depositor.
Likewise, when we borrow from a bank, the bank is not giving the lender money to spend at will. The borrower is receiving funds to invest and use to turn a profit, which will then be returned to the rightful owner, (i.e., the bank). (In future installments, we will discuss if this heter covers loans in which the borrower is not actually investing the money.) This model turns the loan into a classic business deal which is totally interest free, because there is no payment for the loan, rather a return of the investor’s profit.
It is crucial to understand that the heter iska is not a segulah or a magic trick that makes the issue of ribbis disappear. It is a fully binding legal contract. Theoretically, if the heter iska would be found not be legally binding in court, it wouldn’t help, thereby leaving the lender and borrower in violation of ribbis. In fact, about 30 years ago, when it appeared that the banks didn’t take the heter iska with all its implications seriously, most rabbanim in Eretz Yisrael forbade taking loans from the banks.
This being the case, it behooves both sides of the deal to have at least a basic understanding of the contract and to know their rights in the deal, thus preventing the deal from being ribbis. In the coming columns, we will b’ezras Hashem discuss the details of the heter iska.
