Heter Iska: Difference between revisions

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=== Compounding Rate of Return ===
=== Compounding Rate of Return ===
# <p class="indent">Taz writes that it is forbidden to charge a return fee on any cyclic basis, such as weekly, monthly, or yearly. The reason is that it appears to be an interest charge. Shach writes that we’re lenient. Chachmat Adam's heter iska actually made the rate of return determined on a weekly basis. In essence, the iska period was completed each Friday and a new iska was arranged the next week. It is possible to include all future iska's in one heter iska and some poskim think that this avoids the issue of the Taz.<ref>Chelkat Binyamin (Kuntres Heter Iska n. 2)</ref></p>
 
# Taz<ref>177:21</ref> writes that it is forbidden to charge a return fee on any cyclic basis, such as weekly, monthly, or yearly. The reason is that it appears to be an interest charge. Shach<ref>Nekudat Hakesef to Taz 177:21</ref> writes that we’re lenient. Many poskim write that the minhag is to be lenient,<ref>[https://www.hebrewbooks.org/pdfpager.aspx?req=19931&st=&pgnum=46 Rav Moshe Shternbuch (Kitzur Dinei Ribbit 12:6)] writes that the minhag today is like this Shach unlike the Taz.</ref> however, Shulchan Aruch Harav is stringent.<ref>Shulchan Aruch Harav (Ribbit n. 48)</ref>
# Chachmat Adam's heter iska actually made the rate of return determined on a weekly basis. In essence, the iska period was completed each Friday and a new iska was arranged the next week. It is possible to include all future iska's in one heter iska and some poskim think that this avoids the issue of the Taz.<ref>Chelkat Binyamin (Kuntres Heter Iska n. 2)</ref>


== Verification and Return Clauses ==
== Verification and Return Clauses ==

Revision as of 15:19, 15 June 2025

A heter iska is a way to permit lending money to a fellow with interest by transforming the loan into an investment, which is exempt from the prohibition of interest. Nonetheless, several conditions are added into the investment agreement such that it makes it very likely that the borrower will repay the lender his capital and fixed expected profits.

Does a heter iska permit charging interest?

  1. While a heter iska functionally is used by Jews to charge each other interest, it definitely alters the loan arrangement so that there isn't an absolutely definite fixed return. It converts the arrangement into an investment, for which the profits should accrue to the investor. To help ensure that the investor gets his money back several conditions were added into the agreement. See further for details.

Is it a mitzvah to lend with a heter iska?

  1. Lending with a heter iska is not a fulfillment of the mitzvah of lending to a fellow Jew for free.[1]
  2. Is using a heter iska permitted[2] initially or only after the fact or in a difficult situation? Some poskim hold that it is only permitted in extenuating circumstances in order to make a parnasa.[3] Others hold it is totally permitted when done correctly.[4] Nonetheless, one should ensure not to use it at the expense of doing the chesed of lending another Jew money for free when that is possible.[5]

How does a Heter Iska work?

  1. The Heter Iska splits the money in two portions, half (or another percentage) is a money deposit and half is a loan. The borrower may use the half which is a money deposit for business, but as the deposit is considered the property of its owner wherever it may be, the profit that the borrower makes belongs to the lender. However, with regards to the loan portion of the iska it is considered the borrower's money and the profits from that money belong to the borrower, who is only obligated to return the capital of that loan portion without interest. Aside from the breakup of funds, the iska requires that the lender pay the borrower for his work. Otherwise, the mere fact that the borrower was working to invest the money of the lender is itself interest.
  2. One condition of the agreement is that the borrower isn’t trusted to say that he lost money unless he proves it with acceptable witnesses and he isn’t trusted to say that he didn’t profit unless he makes a Shevuah (biblical oath) that he didn’t profit.[6]
  3. Another condition is that if the borrower pays the agreed amount (above the original capital) he doesn’t need to prove with witnesses or oath that he didn’t make any more money. Therefore, at the end of term, the borrower returns the half which is a loan (while keeping the profit made from that half) and returns the deposit along with the profit he made from that half up to the amount agreed upon.
  4. If the borrower didn't profit up to the amount agreed upon he must prove that he didn't profit that much with witnesses and oath. However, Jews should not take an oath even when it is true.[7] As such, the borrower should agree to pay the agreed amount instead of taking the oath. Effectively, the borrower is paying the lender the capital and profits, even if he didn't make profits, in order to exempt himself from taking an oath.

How much can you charge with a Heter Iska?

  1. The amount to pay to avoid the oath can be a fixed dollar amount of a percentage of the capital. It can even be based on current interest rates or inflation.[8]

Usurious practices

  1. The heter iska specifies an anticipated rate of return, though it should be an amount that is reasonable to make for the part of the iska that is an investment. When using a heter iska that is half pikadon the specified return rate should be half of rate that is normally expected.[9]
  2. One may not use the heter iska to charge an amount that is unreasonable for the borrower to have made in his business or investment. Therefore, when using a regular heter iska, half loan half investment, one can only charge a percent that is reasonable for the borrower to have made with half of the money. That is, if the heter iska is to allow charging 7% for the entire iska transaction, it is only permitted if it is reasonable that the borrower will be able to make 14% on the iska, leaving 7% for the gain of the half investment. Otherwise charging higher rates is forbidden and oppressive to the borrower.[10]
  3. The rate shouldn't be considered a reasonably expected profit for the industry in which the iska is to be invested in. Even if it is possible to make a high return since it is unlikely charging that type of return rate is forbidden. It is perfectly fine for the return rate of an iska to be higher than regular interest rates.[11]

Why is any rate of return permitted?

  1. Charging a fixed rate of return for a loan with a heter iska seems to be interest. Nonetheless, this fee is structured as a payment of the investee to avoid having to take the oath, and therefore is permitted. Since it is possible for the investee not to have to pay the fixed rate of return if he did not in fact profit by taking an oath it is not considered interest to pay the return even if he did not earn any profit.[12] This structure is accepted as the minhag and commonly found in heter iska’s.[13]

  2. How much interest can you charge with a Heter Iska? None. You charge for profits and not interest. How much profit you can charge is based on what is considered reasonable. See above.

Compounding Rate of Return

  1. Taz[14] writes that it is forbidden to charge a return fee on any cyclic basis, such as weekly, monthly, or yearly. The reason is that it appears to be an interest charge. Shach[15] writes that we’re lenient. Many poskim write that the minhag is to be lenient,[16] however, Shulchan Aruch Harav is stringent.[17]
  2. Chachmat Adam's heter iska actually made the rate of return determined on a weekly basis. In essence, the iska period was completed each Friday and a new iska was arranged the next week. It is possible to include all future iska's in one heter iska and some poskim think that this avoids the issue of the Taz.[18]

Verification and Return Clauses

Requiring witnesses

  1. The investee is not trusted to say that he lost money unless he proves it with two witnesses. This is a condition that was added in the Maharam's heter iska and was accepted in later heter iska's such as that of the Chachmat Adam.[19]
  2. Even though some poskim advised removing this proviso because it causes the investee to return the capital to the investor even though he actually lost money because he was unable to find valid witnesses,[20] that opinion was not accepted. Nonetheless, some contemporary poskim recommend removing this clause because nowadays there are many people who would give false testimony based on the claims of the parties or based on assumptions and evaluations.[21]
  3. Many heter iska's today still include this clause. For example, bet din of America (retrieved June 13, 2025).
  4. It is possible to specify that only specific trustworthy witnesses, such as the local rabbi and shaliach tzibbur, are to be believed as long as it is possible that they're know about the financial dealings of the iska. Even though it is unlikely that they will know about the iska and testify since it is possible it is permissible. However, in heter iska's today this specification is not employed.[22]

Requiring an oath

  1. Also, the investee is not trusted to say that he didn’t profit up to the amount specified unless he takes an oath. This is a condition that was added in the Maharam's heter iska and was accepted in later heter iska's such as that of the Chachmat Adam.[23]
  2. There is a dispute whether this oath is obligatory because of the nature of the investment or only because of the stipulation of the heter iska.[24]
  3. Someone who is not trusted to take an oath:

Paying to avoid the oath

  1. In order to taking the oath, the heter iska stipulates that it is possible to pay the specified return rate.
  2. It is permissible for the investee to pay the fee to avoid taking the oath even if his intention isn’t out of a religious concern with taking an oath.[25]

What is the investment invested in?

  1. It is possible to specify the investment or not specify.
  2. If the investee already owned merchandise before the heter iska was made and the investor wants to invest his money in that merchandise he can do so. In such a case it is necessary to do a kinyan for the investor to acquire the merchandise. A kinyan sudar can be done for that purchase.[26]
  3. A question can be asked upon this type of arrangement since the investor at the end of the investment period does not want to be returned merchandise. He wants cash. In effect, he wants to buy the merchandise from the investee for a period and then afterwards sell it back to him. That is considered in halacha to be a loan and not a purchase. If that’s the case the entire heter iska is invalid. Some suggest to avoid this problem it is necessary to stipulate that the investee may return merchandise and not cash. Then after the iska is arranged, money transferred, iska document signed, and accepted with a kinyan, it is possible to sign another document in which the investee would agree to return cash and not merchandise.[27] Others defend the practice without adding such a stipulation.[28]

Heter iska for personal loans

  1. A heter iska is really only intended for business loans or where the borrower will use the money for an investment, but it should not be used for a personal loan in order to pay off a bill or pay for household expenses.[29] Nonetheless, the minhag is to be lenient use the heter iska even for that.
  2. Therefore, one shouldn't overdraft from a Jewish or Israeli bank for personal needs since a heter iska doesn't help for that case. This is only permitted one has a business producing profits with which the heter iska can be applied.[30]
  3. Some poskim permit using a heter iska if one has another business, assets, or savings plan any of which that are making profit and if not for the loan one would have sold that business, assets, or savings. The reason that it is permitted is because the heter iska could apply to that investment and its profits. If not for the loan one wouldn't have sold the business, assets, or savings plan anyway it is forbidden.[31]

Terminology in a heter iska

  1. The contracts that are made with a heter iska shouldn't include terms of interest but rather profits.[32] It is permitted to call the investor a lender and the investee the borrower, even though technically these terms aren't fully accurate.[33]

Is a heter iska just a bluff?

  1. The poskim work to explain why the heter iska isn't considered a harama, legal subterfuge to avoid ribbit.[34]

Versions of a Heter Iska

  1. It is important to use a properly constructed heter iska because if it is done improperly the borrower and lender are in violation of very serious prohibitions of interest and are not going to be resurrected at the time of the resurrection of the dead.[35]

Heter Iska of Maharam

  1. One of the most popular heter iska's of all times was that of the Rabbi Mendel ben Rabbi Avigdor of Cracow, known as "Maharam Avigdor" or "Maharam".[36] He lived in the end of the sixteenth century at the time of the Levush, Bach, and Sma. Originally, Maharam wrote a heter iska when he was the Av Bet Din in Ludmir and this version of the heter iska was heavily criticized by the Levush and Sma. When Sma arrived in Ludmir he convinced Maharam to change his heter iska.[37] That version of the heter iska was popularized by Maharam when he moved to Cracow and became the Av Bet Din in Cracow.[38]
    1. The details of the agreement was that the investor's money should first be considered completely a investment , which the investor bears all responsibility and stands to gain all of its profits. The investee should work to try to make profits off of the money until he reaches a certain agreed amount. Then the money is converted into an interest free loan.
  2. For two and a half centuries after Maharam the most commonly used heter iska in Europe was this second version of the heter iska of Maharam. Therefore, when the heter iska of Maharam is referenced without qualification it refers to his second version of the heter iska. In fact, Magen Avraham advised people to add "היתר עיסקא על פי תקנת מהר"ם" or "על צד היתר עיסקא" to a loan document and that incorporated by reference Maharam's heter iska.
  3. Today Maharam's heter iska fell out of use for several reasons[39] and in its place the heter iska of Chachmat Adam, popularized further by the Kitzur Shulchan Aruch, became the standard heter iska. Nowadays, if someone writes "על צד היתר עיסקא" today they do not mean to incorporate Maharam's heter iska. They probably refer to a type of heter iska of half halvah and half pikadon, but since it is unclear to which heter iska he is referencing he should be more specific.

Conditions of the Heter Iska

  1. Some heter iska's add a condition that if the borrower doesn't appear in bet din each erev rosh chodesh to submit his claims for his losses he has admitted that there were no losses. Some argue that this condition should not be added.[40]
  2. There are many other conditions and one must consult with a reliable orthodox rabbi regarding each situation and how to draw up a Heter Iska.[41]

Complete Pikadon Heter Iska

  1. An alternate heter iska that is in use today is where the entire sum is considered an investment and there's no loan at all. Some argue that one shouldn't use this heter iska.[42]

Specific Companies Using Heter Iska

  1. Quicken loans which goes through Chase Bank and has a large ownership of Jews has a heter iska provision in their loans.[43]
  2. Using a credit card in Israel is permitted since the companies use Heter Iska.[44]

Heter Iska after the Termination Date

  1. If someone had a heter iska for a certain period of time if after that period of time the borrower does not return the money and continues to invest it, the borrower must pay the lender according to his profits and under the conditions of the iska even after the iska's termination.[45] However, others disagree and hold that although the borrower may pay he is not obligated to give up his profits after the iska's termination.[46]
  2. Therefore, it is advisable to specify in the heter iska that the terms and conditions of the iska will survive the termination date if it happens that the borrower doesn't pay or the lender doesn't come to collect. This ensures that the lender is entitled to profits in such a post-term iska.[47]

Sources

  1. ↑ Ahavat Chesed (Gemilut Chasadim ch. 15 s.v. v’ata)
  2. ↑ Maaseh Rav n. 108 writes that the Gra disapproved of the heter iska altogether. See however Tosefet Maaseh Rav n. 28 which quotes Rav Chaim Volozhin as permitting it.
  3. ↑ The Sma (Derech Aruka n. 22), who popularized the modern heter iska, introduced it by saying that it should only be used as an ad hoc leniency for people to have basic needs. Malveh Hashem 13:27 concludes that the heter iska should only be used in extenuating circumstances. Mishpatei Ribbit 28:2 agrees.
  4. ↑ Chatom Sofer 4:48, Imrei Yosher 2:192, Brit Yehuda 40 fnt. 1, Horah Brurah (Kuntres Heter Iska ch. 2). Brit Yehuda concludes that someone who wants to be lenient can be and someone who wants to be strict will be blessed.
  5. ↑ Chafetz Chaim in Ahavat Chesed (Gemiliut Chesed 15) only complains that using the heter iska avoids lending money for free which is a chesed. Aseh Lecha Rav 1:60 (also printed in Or Torah 5732 Shevat siman 72) writes that the heter iska is permitted since it is for the purpose of business and only when a poor Jew asks for a loan a person may not use a heter iska and doing so would violate the basic principle of the halacha. Instead one should give them an interest free loan if one could.
  6. ↑ Sma (Kuntres Haribbit, Derech Aruka n. 9) writes that Rav Mendel Avigdor of Ludmir originally instituted a heter iska with conditions that did not trust the borrower about losses or gains unless he could prove it with two witnesses which the lender selected. However, Sma when he came to Ludmir argued with Rav Mendel that this was completely forbidden and Rav Mendel retracted. When Rav Mendel moved to Cracow and became the Av Bet Din there he drafted another heter iska which accommodated the Sma's issue. It allowed the lender not to trust the lender about losses unless he proved it with witnesses, but about gains the lender must trust the lender as long as he would take an oath to that effect.
    • Sma's claim is based on the Levush 167. He writes that it is forbidden to not trust the borrower about gains because how could the lender possibly know with certainty that the borrower made money. Also, the borrower cannot forgive the gains to the lender.
    • The poskim all accept this distinction of the Levush and Sma to require witnesses for the capital and oath for the profits. This is the conclusion of Chelkat Binyamin (Kuntres Heter Iska n. 1).
  7. ↑ Chatom Sofer CM 90 writes that it is a prohibition to take an oath even though it is true. While this cannot actually be true that it is forbidden to take an oath that is true, because if that was the case the entire heter iska would be completely invalid. It would impossible for a person to take an oath to exempt himself from paying profits to the lender even if he didn't make profit. That would render the heter iska prohibited as karov l'sachar v'rachok l'hefsed. Obviously, then it isn't actually prohibited but rather it is proper for a Jew to avoid taking an oath ever even if it is true. This seems to be the view of Chelkat Binyamin (Kuntres Heter Iska n. 1).
    • Shulchan Aruch O.C. 159:1 writes that a Jew should avoid taking an oath about the future because perhaps he won't be fulfill them. That doesn't necessarily imply that a person shouldn't take an oath about the past. Nonetheless, Chatom Sofer writes that this too is forbidden (or almost forbidden).
    • It is noteworthy that while Chatom Sofer says that it is forbidden to take an oath even when it is true, Rambam (Mitzvah Aseh n. 7, Hilchot Shavuot 11:1) holds that it indeed a mitzvah to do so.
  8. ↑ Rav Elyashiv (Kovetz Teshuvot 3:125), Chelkat Binyamin (Kuntres Heter Iska n. 2)
  9. ↑ Igrot Moshe YD 2:62, 63, Chelkat Binyamin (Kuntres Heter Iska n. 2)
  10. ↑ Horah Brurah (Kuntres Heter Iska ch. 2) quoting Rav Meir Mazuz
  11. ↑ Chelkat Binyamin (Kuntres Heter Iska n. 2)
  12. ↑ Taz 177:12 explains that it is only forbidden to fix a rate of return when this fixed rate is guaranteed even if the iska does not profit. However, if the rate of return is only paid from profits, then in effect it just caps the potential gains of the iska and does not involve interest at all. Shulchan Aruch Harav (Ribbit n. 41) and Chelkat Binyamin (Kuntres Heter Iska n. 2) agree.
  13. ↑ Chelkat Binyamin (Kuntres Heter Iska n. 2)
  14. ↑ 177:21
  15. ↑ Nekudat Hakesef to Taz 177:21
  16. ↑ Rav Moshe Shternbuch (Kitzur Dinei Ribbit 12:6) writes that the minhag today is like this Shach unlike the Taz.
  17. ↑ Shulchan Aruch Harav (Ribbit n. 48)
  18. ↑ Chelkat Binyamin (Kuntres Heter Iska n. 2)
  19. ↑ Nachalat Shiva ch. 40
  20. ↑ Shlah (Chullin p. 84a)
  21. ↑ Rav Moshe Feinstein (Igrot Moshe YD 2:62)
  22. ↑ Chelkat Binyamin (Kuntres Heter Iska n. 3)
  23. ↑ Nachalat Shiva ch. 40
  24. ↑ Shulchan Aruch CM 93:4 writes that someone who is watching over someone else’s money for investments is considered like a partner who is required to take a rabbinic oath. Rama quotes a dispute whether the investee who is paid needs to take an oath. Rabbenu Tam holds that he does not need to take such an oath since the reason for the oath is a concern that the investee will try to deceive the investor and steal some of the funds for himself. However, explains Rabbenu Tam, once the investee is paid for his work to invest the money there is no such concern. Netivot holds that this dispute is unresolved. However, Pitchei Teshuva (to CM 93:4) quotes the Nodeh Beyehuda who holds like Rambam that he’s obligated to take an oath. Bigdei Yesha, also cited by Pitchei Teshuva, adds that even Rabbenu Tam agrees with Rambam in the case of the modern heter iska. Nowadays with the heter iska the investee is only paid a minimal fee for his work but that doesn’t alleviate the concern that he might try to steal from the funds. Either way, Netivot writes that the investee must take an oath as required by the stipulations of the heter iska contract, even if he should have been exempt if not for that stipulation. Chelkat Binyamin (Kuntres Heter Iska n. 1) agrees.
  25. ↑ Chelkat Binyamin (Kuntres Heter Iska n. 2) based on Chachmat Adam 142:6
  26. ↑ Sma (Kuntres Ribbit
  27. ↑ Chelkat Binyamin (Kuntres Heter Iska n. 14)
  28. ↑ Netivot Shalom 174:1:14 writes that there’s no issue because the stipulation to sell the merchandise and return cash is a general stipulation. It applies whether or not the merchandise belonged to the seller in advance and as such it doesn’t make the cases in which it is used for previously owned merchandise into a loan. There is no doubt that people consider it a sale and not a loan because this is a commonplace arrangement and everyone knows that they want the sale to be effective so that it isn’t a violation of ribbit. Lastly, it isn’t a full sale of the merchandise to the investor in the first place, rather it is just an instance of getting back money. Chelkat Binyamin (Kuntres Heter Iska fnt. 168) disagrees with these justifications.
  29. ↑ Horah Brurah (Kuntres Heter Iska ch. 2) citing Ginat Veradim 6:4, Perach Shoshan 6:1, Maharival 2:26, Pri Amada (Shelichin Ushutfin 6), Eretz Chaim 177:5, Chaim Byad 41, Graz 42, 46, Kitzur Shulchan Aruch 66:10, Har Hakarmel CM 25, Atzi Levona 177:6, Imrei Yosher 1:108, Hari Besamim 2:143, Erech Shay 177:7, Teshurat Shay 88, and Malveh Hashem 13:10. Chut Shani 18:3 agrees.
  30. ↑ Horah Brurah (Kuntres Heter Iska ch. 3 p. 149), Chut Shani 18:3
  31. ↑ Netivot Shalom p. 719 quoting Rav Elyashiv, Horah Brurah p. 148 agrees but adds if one has a business one doesn't need this leniency and one can just acquire for him a portion of your profits.
  32. ↑ Netivot Shalom p. 734 n. 34
  33. ↑ Chelkat Binyamin (Kuntres Heter Iska n. 6)
  34. ↑ Chelkat Yakov YD 68 writes that the heter iska isn't a harama because the people involved genuinely want to avoid any sin and so they fully mean to comply with all of the stipulations of the heter iska. Chelkat Binyamin Kuntres Heter Iska n. 12 agrees. (In light of the Taz 167:1 and others it is hard to understand this explanation.) Minchat Shlomo 1:27 is troubled how the Heter Iska is permitted but yet allows it completely as is the practice. Sefer Hazichronot cited by Brit Yehuda ch. 40 fnt. 1 writes that the heter iska is a harama. Maharsham 9:71 writes that the heter iska needs to be made in a way that is reasonable and not evident that it is going to come to interest since if there's a loss the borrower can swear he didn't gain and not pay any interest.
  35. ↑ Ahavat Chesed (Gemilut Chasadim ch. 15 s.v. v’ata), Chelkat Binyamin (Kuntres Heter Iska, Introduction)
  36. ↑ Maharam Avigdor is not to be confused with Rabbi Meir ben Baruch of Rotenburg of the thirteenth century, also known as Maharam. Maharam without any other attributions in most rabbinic literature refers to Maharam Rotenburg, however, in the context of the heter iska the unqualified term Maharam refers to Maharam Avigdor.
    • What is especially confusing in this matter is that the Maharam Avigdor's heter iska is similar and loosely based on a heter iska drawn upon by Maharam Rotenburg, discussed in Shulchan Aruch Y.D. 167.
  37. ↑ Sma (Kuntres Ribbit Aruka n. 9), Chelkat Binyamin (Kuntres Heter Iska fnt. 16)
  38. ↑ The text of that heter iska can be found in Nachalat Shiva ch. 40.
  39. ↑ Chelkat Yakov 3:189:4 explains why the world stopped using the heter iska of the Maharam and instead started to use that of the Chachmat Adam. See also Kitzur Dinei Ribbit Hametzuyim for another reason.
  40. ↑ Teshuvot Vehanhagot 6:181 argues that adding this clause of the Chayei Adam is a complete haarama and forbidden. He explains that the Chayei Adam is referring to a case where the investor wanted to know the deals of the business each month and as such he ask the borrower to inform him. However, for a bank that gives loans today they have no interest to know the works of each person's business monthly and requiring a borrower to do so is a complete mockery of halacha.
  41. ↑ Kitzur Shulchan Aruch 66:1-6. See Ribit Halacha LeMaseh chapter 20. One can see this shtar isko on the website of the Beth Din of America.
    • Jewish Agent: According to Rashi (cited by Rama 160:16) that there’s no prohibition of ribbit when done through a shaliach perhaps that can permit using a bank loan since the teller is merely an agent of the bank. Bet Yosef 160:16 and Taz vehemently argue that this is completely forbidden and a ruse. Rather this citation of Rashi was made a mistaken student. Rama and Shach defend Rashi.
    • Non-Jewish Agent: Rabbenu Tam (cited by Tosfot 71b s.v. kgon) held it was permitted to lend with interest to a Jew using a non-Jewish agent since there's no concept of agency between a Jew and a non-Jew. Therefore, even though one Jew asked another Jew to get a loan with interest from another Jew it is permitted since the non-Jew is acting on his own. Most rishonim disagree with the Rabbenu Tam.
    • Non-Jewish Agent with a Security Deposit: The Ri held that it was permitted to send a non-Jew with a security deposit to another Jew through a non-Jewish agent in order to borrow with interest. The non-Jew is considered to have acquired the deposit and so it is as though there's a separate loan between the borrower Jew and the non-Jew and another one with the non-Jew and the lender Jew.
    • "Witness Clause Heter Iska": The Levush 167:1 writes extensively against the Heter Iska of his time that required bringing witnessed to testify that the investment didn't make the expected gain. He claims that it is a biblical violation of Ribbit since it is known that with this condition one can specify not to trust any witnessed besides two witnesses on opposite sides of the world and make it impossible for the borrower to be exempt from having to pay the interest. Furthermore, the lender has no right to say that he is certain that the borrower made the gains they expected. Often he knows that it isn't the case and still he is collecting the interest. He distinguishes between ensuring you get back the capital with a clause of having to bring witnesses and that is based on the Trumat Hadeshen 302. However, he would not allow adding a condition to allowing the borrower to exempt himself from paying for the expected gain when he didn't gain money. Shach 167:1 and Taz 167:1 cite and agree with the Levush. Shach adds that one could ask the borrower for a vow that he in fact didn't gain money but he may not ask for witnesses. Taz adds that the witness clause for the capital has to be reasonable to allow for witnesses that could reasonably know about the state of the borrower's business. Lastly, both the Taz and Shach make it obvious that the measure that the Trumat Hadeshen allowed to ensure the return of the capital is only permitted when it is otherwise only a rabbinic interest such as an iska, half loan and half investment, but not for a case of pure loan.
    • "Derisha's Heter Iska": Derisha 167:1 seems to allow setting up an iska half loan and half investment which evolves into a complete loan after the iska reaches a certain percent of gain. The lender needs to pay a small amount to the borrower in order to pay him for his work investing the half investment. Then the lender can buy the "call option" from the borrower that if the investment doesn't reach the percent gain specified then the borrower will pay the difference between the actual price of the investment and the specified price. They can adjust the price of this option to a small amount. However, the Taz 167:1 points out that this approach is complete incorrect and is a violation of biblical interest. He brings many proofs including the Rosh responsa 88:2 who explicitly rejects this idea. The Shaarei Bracha 167:1 cites the Maharam Chaviv 23 who agrees with the Taz. He also cites the Radvaz 946 who says the same.
    • "Levush's Heter Iska": Shulchan Aruch 177:18 based on the Rivash allows selling specific amount of items at a price that is cheaper than the market price. Then the buyer would stipulate that he wants the seller to deliver the goods by a specific date and if he doesn't do so he has to pay a penalty of a certain amount. Then the buyer would pay upfront and the seller would miss the delivery date and be obligated to return the original payment as well as the penalty. That isn't ribbit since it is a penalty and not a payment for the time value of money. Additionally since it is done completely with sales it isn't considered a loophole around ribbit. For this to work the seller actually needs the property he is selling and the buyer needs to make a legal acquisition of the property (kinyan). Levush 167:1 adds that the buyer needs to be ready that the seller actually deliver the goods by that date instead of paying the penalty. Taz 167:1 adds that this is forbidden if initially they stated that they want a loan since then the entire deal becomes a loophole to interest. Nekudat Hakesef 167:1 argues with the Taz since this case is completely a sale and therefore isn't an issue of finding a loophole to ribbit even if one originally requested a loan.
    • Modern Heter Iska: Chelkat Yakov YD 68 explains that it isn't a legal loophole because the parties involved really intend to follow the contract and not violate interest. Chelkat Binyamin Kuntres Heter Iska n. 12 agrees. (In light of the Taz 167:1 and others it is hard to understand this explanation.) Minchat Shlomo 1:27 is troubled how the Heter Iska is permitted but yet allows it completely as is the practice.
  42. ↑ Brit Yehuda ch. 40 fnt. 2 writes that the gedolim of previous generations didn't endorse a complete pikadon heter iska since it isn't based on Chazal's institutions and is more of a harama.
  43. ↑ It is reported that the heter iska for the quicken loans was approved by Rav Dovid Feinstein, Rav Shmuel Kamenetsky, Rav Shlomo Miller, Rav Moshe Heinemann, Rav Yisroel Reisman and Rav Shmuel Fuerst. Listen to Rabbi Yona Reiss's discussion of this heter iska.
  44. ↑ Torat Ribbit 17:28
  45. ↑ Taz 177:31, Rabbi Yosef Fleishman (Dinonline.org, Bamidbar 5785) writes that this opinion is normative and accepted.
  46. ↑ Mayim Kedoshim (Teshuva on Ribbit, end of Sefer), Levushei Sarad (YD n. 75) and Pitchei Teshuva 177:2 cite this Mayim Kedoshim, as does Chelkat Binyamin. Because of this opinion Levushei Sarad and Chelkat Binyamin write that you can't extract money from the borrower against his will.
  47. ↑ Levushei Sarad (YD 75), Chelkat Binyamin (Kuntres Heter Iska)
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