The Jewish Way Of Lending

Candlelighting, Readings:
Shabbat candles: 5:14 p.m.
Torah: Exodus 21:1-24:18; 30:11-16
Haftarah: II Kings 11:17-12:17
Havdalah: 6:15 p.m.            

For hundreds of years in Eastern Europe, traditional Jewish communities celebrated their key communal institutions by designating specific Shabbatot each year to honor the people who ran them. On Shabbat Yayera, for example, when the parsha describes how Abraham displayed exemplary hospitality to the three visiting angels, the leaders of the Chevrah Hachnasas Orchim (Society for Hospitality) would receive aliyas. On Shabbat Chayei Sara, when the parsha describes the purchase of a burial plot by Abraham for Sarah, the leaders of the Chevrah Kaddisha (the Free Burial Society) were called up. Shabbat Mishpatim, in the shtetl and then in America, honored the leaders of the G’mach, or Gemilus Chesed, the interest-free loan society, because Mishpatim contains one of the three biblical sources for the mitzvah of charitable lending, or, to use modern philanthropic parlance, Jewish microfinance:

“If you lend money to My people, to the poor among you, do not act toward them as a creditor; exact no interest from them” [Exodus 22:24]. Similar verses can be found at Leviticus 25:36 and Deuteronomy 23:20.

The Jewish interpretive tradition has always understood lending to the poor on an interest-free basis as an affirmative obligation, indeed as a form of tzedakah superior to giving alms, because lending promotes self-sufficiency while maintaining the dignity of the borrower. This tradition was most famously articulated by Maimonides in the Mishneh Torah, his magisterial 12th-century codification of Jewish law: “The highest degree of charity, exceeded by none, is that of a person who assists a poor Jew by providing him with a gift or [interest-free] loan, or by accepting him into a business partnership, or by helping him find employment” — in a word, by making him self-sufficient so that he does not need to again ask for financial assistance from others” [Mishneh Torah, Book of Agriculture, Laws of Charity, 10:7].

Of all the ways of promoting economic self-sufficiency — the ideal of tzedakah — only interest-free loans preserve the dignity of the recipient while also offering the possibility of enormous philanthropic leverage: If you give Chaim $100 to start a business, you have done a wonderful mitzvah helping Chaim. However, if you make Chaim an interest-free loan of $100 to start a business, and he repays you, and you then lend the money to Chanah to start a business, and she repays you, and so on, the impact of that same $100 can be multiplied a thousand-fold. Effective charitable lending rotates scarce philanthropic resources, enabling limited funds to help an unlimited number of people. This would explain why Eastern European Jewish communities institutionalized interest-free lending, creating interest-free loans societies, or G’machs, which became a standard communal institution in Jewish communities large and small.

The G’mach was transplanted to America at the end of the 19th century, with the first great wave of Jewish immigration from Eastern Europe. They provided interest-free loans to pay the rent or buy medicine at a time when there was no government-funded safety net, and provided capital to enable thousands of micro-entrepreneurs to stock a pushcart or buy a sewing machine in an era when their only alternative source of credit was loan sharks. These organizations often became founding or early members of their local Jewish federations.

Today, with historical continuity, they also serve, to a significant extent, Jewish immigrants from Vilna, Minsk, Kiev and Kishiniev; Jews who may never have set foot in a synagogue, who are very surprised to receive a loan without interest, and who are completely unaware that G’machs were an integral part of the dense Jewish society destroyed by Stalinism in their old towns and cities.

And it all began with a verse in Mishpatim. Because of the values that inform it — individual dignity and self-sufficiency — and its inherent flexibility and economic efficiency, it has endured for centuries, and endures still.

Shana Novick is the executive director of the Hebrew Free Loan Society of New York, which this year is celebrating its 120th anniversary.