Last week we raised the issue of lending in foreign currency. This is particularly relevant to those of us living in Eretz Yisrael who may occasionally lend or borrow in dollars or other currencies. 

We explained that a loan in a foreign currency is halachically forbidden and can result in losses for the lender if the currency’s value rises with respect to the shekel, so that when the loan is repaid the dollar is worth more than it was at the time that the loan commenced. 

Unfortunately, this halacha is relatively unknown, probably since it applies only to foreign currency, which by its very nature is uncommon. However, in today’s global village, where distant countries are just a few hours away by plane, lending in foreign currency is more relevant than ever, especially for those who have moved from their countries of origin.

How can one who is living in Eretz Yisrael lend or borrow dollars in accordance with halacha? How can the lender be sure that he will not lose out (i.e., that the borrower will be able to return the full amount of the loan)?

Although there are several ways to permit this loan, the option that will also prevent the lender from losing money is by making sure that the borrower owns some of the currency being borrowed. Practically speaking, this means that if one is asked to lend dollars, one must ask the borrower if he owns at least one dollar. Assuming the answer is yes, then one may lend him the money.

How does this work? If the borrower himself owns some of the currency, then as soon as the loan goes into effect, the foreign currency he owns (which he also borrowed in) is designated for his lender as eventual repayment. It therefore is considered as if the lender owns that money. And so we are no longer concerned about the currency’s rising value, because the borrower will not be returning his own money to the lender; rather, he’ll be giving back what belonged to the lender the whole time. 

We will expand on this matter next week, be’ezras Hashem.