ribbis

The banking system is needed in society in order to transfer money from those who save it to those who use it. For example, if Jim has money and Bob needs a loan to start a business, but they don’t know each other, in order for Jim to loan Bob the money he would have to spend a lot of time and money to find out if Bob is reliable. But with banks in the picture, Jim trusts the bank so Jim can give money to the bank, and the bank has many resources to learn about Bob, and the bank can loan Bob the money for much cheaper. The bank then charges interest to Bob as payment for the loan, and give Jim some of that interest.

In a halachik Jewish society where interest is assur, would banks exist? How could Jewish run banks with Jewish clients exist without interest? And if banks didn’t exist, wouldn’t it be much more difficult and expensive for loans to be made to start up businesses? Wouldn’t that slow down economic growth?