Ribbit

Ribbit is the prohibition in halacha (Jewish law) on lending or borrowing at interest when both the lender and the borrower are Jewish. The rule forbids any payment, in money, goods or favors, that a borrower gives a lender in return for the use of money or goods over time. It binds the lender who receives the payment, the borrower who pays it and, according to the classical sources, anyone who helps arrange the loan, such as a guarantor, a witness or the scribe who writes the note.

The word comes from the Hebrew root meaning "to increase". Ribbit is often compared with riba in Islamic law and with the broader Western idea of usury, but its scope, its exceptions and the legal devices built around it are distinct.

The prohibition rests on three passages of the Torah: Exodus 22:24, Leviticus 25:35–37 and Deuteronomy 23:20–21. The texts use two words, neshech (literally "bite") and tarbit ("increase"), which the rabbis read as two names for the same forbidden gain. Deuteronomy 23:21 permits lending at interest to a non-Jew, and the later codes treat loans across that line as outside the core prohibition.

The Talmud discusses the subject at length in the fifth chapter of tractate Bava Metzia. The medieval codes, above all the Shulchan Aruch (Yoreh De'ah, sections 159–177), turned that discussion into detailed rules that a posek (decisor of Jewish law) still applies to modern transactions.

Jewish law distinguishes two broad levels of the prohibition:

• Ribbit ketzutzah (fixed interest): an increase agreed at the time of the loan. This is the biblical prohibition, and a beit din (rabbinical court) can order the lender to return it.
• Avak ribbit ("the dust of interest"): rabbinic extensions covering transactions that resemble interest without being a loan at a stated rate, such as some advance purchases at a discount, gifts given to a lender because of the loan, or certain sale-and-repurchase arrangements.

The rabbinic layer reaches unexpected places. A borrower who would not normally greet the lender should not start doing so because of the loan, and a lender may not use the borrower's property free of charge while the debt is outstanding. These rules show that the concern is any benefit flowing to the lender because of the delay in repayment.

Strict application of ribbit would make ordinary business finance between Jews nearly impossible. The answer developed from the 16th century onward is the heter iska ("permission for a venture"). It recasts the funds as an iska, a joint venture in which half of the money is treated as a loan and half as an investment held for the provider's benefit. The provider's return is then a share of profit rather than interest, with clauses that let the recipient pay a fixed amount instead of proving actual results.

Banks in Israel operate under a general heter iska that covers their dealings with customers, and many Jewish-owned businesses elsewhere sign one when lending to or borrowing from each other. Authorities differ on how far the device can be used for personal consumer loans, and individual rulings are usually sought for unusual structures.

Questions of ribbit arise in mortgages, credit cards, late-payment fees, deposit accounts and corporate bonds. A deposit in a bank owned by non-Jewish shareholders is generally treated differently from one in a Jewish-owned firm, which led to debate over publicly traded banks and over companies with mixed ownership. Interest-free loan societies, each known as a gemach, provide one practical alternative: they lend without return as a form of tzedakah (charity).

Islamic law also forbids interest, through the doctrines of riba al-nasiah (increase for deferral) and riba al-fadl (unequal exchange of like goods). The two systems share the basic objection to a fixed return for the passage of time, and both rely on partnership forms rather than loans to finance commerce. The differences are significant, however: ribbit applies only between Jews, while riba applies regardless of the counterparty's faith, and the heter iska has no exact equivalent in mainstream Islamic finance, where structures such as mudarabah are used instead. A related Jewish institution, the prozbul, addresses a different problem, the cancellation of debts in the shmita year.