Prozbul & Iska LLC

Don't miss an episode! Subscribe to the Madlik podcast: Spotify | Apple Podcasts | Google Podcasts

and Join Madlik on Clubhouse every Thursday at 8:00pm Eastern so you can participate in our weekly live discussion of the Parsha

The biblical Hebrew terms for interest are neshekh (Hebrew: נשך), literally meaning a bite, and marbit or tarbit (מרבית‎/תרבית), which refers to the lender's profit.^[4] Neshekh refers to interest deducted in advance from the loaned money given to the borrower; the words marbit and tarbit refer to interest added to the amount that the borrower must repay.^[5] The words marbit and tarbit, for the form of interest most familiar in modern times, became ribbit (ריבית) in modern Hebrew.^{[citation needed]} The latter word is similar to the Arabic word riba used in the Quran.

The rabbis of the time found the state of affairs to be both a major challenge to the status quo and a violation of numerous mitzvot, Torah commandments, that require magnanimity to the poor, including one within the aforementioned passage in Deuteronomy.^[3] The rabbis, under the suggestion of Hillel the Elder, created a loophole in Jewish law, in which a legal document would accompany the interest-free loans (charging interest to fellow Jews is forbidden in the Torah) issued by individuals that stated that the loans were to be transferred to the courts as the law of remission does not apply to loans within the public domain. This groundbreaking institution benefited both borrower and lender; because lenders knew their money was safe even following the Sabbatical year, they were likely to loan to the poor.

The last chapter of Tractate Shevi'it, chapter 10, in the Mishna and the Jerusalem Talmud, details the prozbul legal instrument and specifies how it is drawn up in a court when the loan is made.^[4]

Heter Iska and other evasions[edit]

Heter Iska

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.^[4] However, the Mishnah argues that it would not 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;^[15] 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 principles.

Other evasions

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 lend something to another and buy it back from them at a reduced price^[4] (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 so allows the lender to make a profit from the difference between the reduced price and the actual worth of the loaned thing.^[4]

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 was not 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.^[16][17]