Photo Credit: Jewish Press

The Benders retired to Eretz Yisrael after living in the United States for many years. Their daughter, Mrs. Fine, had moved to Eretz Yisrael 15 years earlier and was currently renovating her house.

The Fines approached various banks seeking a loan. One evening, Mr. Bender said to his daughter, “It’s a shame for you to pay interest to the banks. We have money sitting in CDs that are maturing shortly. We can lend you the money, and this way you won’t have to bother with a bank loan.”

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“If you’re willing, that would be great,” she said. “Our salaries are in shekels, though. We can’t repay you in dollars.”

“Don’t worry,” said Mr. Bender, “with the dollar dropping against the shekel, it’s actually more profitable for us to get repaid in shekels. The shekel is more stable now than the dollar!”

When she got home that evening, Mrs. Fine told her husband about her parents’ offer. He deeply appreciated it but said to his wife that borrowing dollars and returning shekels might be a violation of the laws of ribbis.

That night, they approached Rabbi Dayan with their concern. After considering the matter, he said the following:

“A loan can involve either money or commodities. And just like one who borrows $1,000 should repay $1,000, one who borrows a ton of wheat should repay a ton of wheat.

“However, Chazal prohibited loans of commodities (se’ah b’se’ah) since the price of the commodities might rise, and it would seem like ribbis if the borrower repays the same amount of produce which later is worth more. They did permit it, though, under certain conditions [Yoreh De’ah and Shach 162:1].

“Although the dollar and shekel are both currency, local legal tender is considered money while foreign currency is halachically considered a commodity. Thus, a loan of foreign currency is considered a commodity loan [Choshen Mishpat 203:8].

“Some poskim maintain that dollars are currency in Israel too since years ago, some stores in Israel and many real estate transactions were valued in U.S. dollars. However, most consider dollars a commodity, especially nowadays when the shekel has stabilized and price quotes are required by law to be in shekels [Bris Yehudah 18:15].

“Nonetheless, when a commodity, or foreign currency, is valued at the time of a loan in local currency, and the borrower agrees to repay that monetary value, there is no rabbinic prohibition against going ahead with the loan since it’s considered a loan of a set monetary value [Bris Yehuda 17:3].

“Thus, if the shekel value of the dollars is calculated at the time of the loan, and that shekel value is returned, there is no issue of ribbis or se’ah b’se’ah even if the exchange rate changes. It’s also permitted to repay that shekel value in dollars at the exchange rate when repaying [Toras Ribbis 7:18, 19:7; Machaneh Ephraim, Ribbis #27].

“Often, in permitted circumstances of se’ah b’se’ah,” concluded Rabbi Dayan, “it’s also permissible to stipulate initially that the loan be repaid at its dollar value.”

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Rabbi Meir Orlian is a faculty member of the Business Halacha Institute, headed by HaRav Chaim Kohn, a noted dayan. To receive BHI’s free newsletter, Business Weekly, send an e-mail to subscribe@businesshalacha.com. For questions regarding business halacha issues, or to bring a BHI lecturer to your business or shul, call the confidential hotline at 877-845-8455 or e-mail ask@businesshalacha.com.