ABSTRACT
Usury is forbidden—but business partnerships are allowed. The Talmud (Babylonian Talmud Baba Metzia 104b) deems money invested in a business venture (an “isqa”) be given half as a deposit and half as a loan. In the fifteenth century, R. Israel Isserlein used this rule to allow for no-risk partnerships, forbidden by Talmudic law, by adding the following proviso: the risk would be assumed by the investor, but the recipient of the funds would designate the rabbi and the cantor of the town as the only persons who could testify that he did not embezzle the funds. Thus, the recipient would never be believed that he executed the partnership faithfully and would end up assuming all the risk. This permission was gradually expanded from non-risk partnerships to outright loans, first for investment, then for consumption. The borrower is designated an “investee” and is expected to share 50 percent of his profits with the lender. He is not trusted and must provide rabbinically qualified witnesses to any statement he makes about the profits, and also take an oath to corroborate the statement. Other draconian conditions are included as well, for example that the borrower must repay the loan on the bank’s first request and come to litigation at the time and place of the bank’s choosing. This is intended to make the alternative, offered in paragraph 10, the best option: paying an agreed sum, monthly, to avoid these conditions. The optics of the transaction are the same as any interest-bearing bank loan: the borrower makes monthly payments that add up to more than the sum of the principal. But those who understand the transaction know that it is a perfectly permitted loan with no hint of usury—plus a no-litigation fee that has nothing at all to do with the loan. (The proviso at the end, however, gives it all away and states the procedure in the event that the bill cannot do its job and “permit the prohibition of usury.”)
