Note: I am sure that I am missing some basics in economics. I am a Rabbi and not an economist. Please feel free to comment.
The Great Recession (also referred to as the global recession of 2009) is a marked global economic decline that began in December 2007 and took a particularly sharp downward turn in September 2008. The active phase of the crisis, which manifested as the bursting of the U.S. housing bubble, which peaked in 2006,caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally. Some economists have claimed that the origin of the financial crisis of 2007–2010 can be traced back to an extremely indebted US economy. High private debt levels also impact growth by making recessions deeper and the following recovery weaker. We are still working our way out of this situation.
It was hard not thinking about all of this when reading about the biblical institution of loans in Mishpatim, this week’s Torah portion. There we read:
24 If you lend money to any of My people, even to the poor with you, you shall not be to him as a creditor; neither shall you lay upon him interest. 25 If you at all take your neighbor’s garment to pledge, you shall restore it to him by that the sun goes down; 26 for that is his only covering, it is his garment for his skin; wherein shall he sleep? and it shall come to pass, when he cries to Me, that I will hear; for I am gracious. ( Exodus 22:24-26)
Who can we charge interest? Who can we not charge interest? Being part of Klal Yisrael is not just the idea of Jewish people, but also a realization of the corporation of Israel. But seeing usury only in terms of belonging to a specific group is missing some of the lessons the Torah has to teach us about the institution of loans. It is interesting to note the size of standard loans. The pledge needed to secure a loan was only a shirt, but if it was excessive (as the shirt off their back) it was limited by the law . There is clearly a lesson in here of God’s compassion for the needy and maybe also for society at large.
Our Torah portion is resonant with today’s microfinance world. These microloans are made to impoverished borrowers who typically lack collateral, steady employment and a verifiable credit history. It is designed not only to support entrepreneurship and alleviate poverty, but also in many cases to empower women and uplift entire communities by extension. In many communities worldwide, in developed and developing nations alike, women lack the highly stable employment histories that traditional lenders tend to require. This reality might result from factors such as leaving the paid workforce to care for children and elderly relatives. As of 2009 an estimated 74 million men and women held microloans that totaled US$38 billion. Grameen Bank reports that repayment success rates are between 95 and 98 percent.
At the core giving a loan is trusting another person to pay you back. Giving someone a hand to help him/herself is more important than just a hand out. But we need to be sure to take loans that we can pay back or we put our whole system in jeopardy. On an interpersonal and collective level giving small loans might not just be doing good, but also doing well.
- This was inspired by my old friend Saul Korin