This week was finals at my school, and I was able to write an essay that I am very proud of on the patristic view of interest-bearing loans. This was probably my favorite paper I have written in my undergraduate career, and I may even write a follow-up essay, because there was much that I simply wasn't able to get to. There are two points, however, that I saved in my notes before deleting them, so I included them in italics where they would have gone. As a result they are underdeveloped, but I nonetheless found them interesting. I hope you enjoy!
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Lending at interest is ubiquitous in the modern economy, and in fact, much of the economy is founded upon the practice. Many of us in higher education, for example, had to get tens of thousands of dollars in loans simply to get here in the first place. However, for the first fourteen centuries of the Christian church, interest-bearing loans were fiercely condemned, to the extent that any priest who was found to have lent at interest would lose his office (Nicaea, Canon 17). While this seems unthinkable in the modern day, the shift towards its normalization happened rather quickly. However, with the speed of such a shift, the ancient and medieval arguments against it really were not adequately addressed. To showcase the arguments against the practice, I will be relying on Ambrose of Milan and Basil the Great, representatives of the western and eastern patristic traditions respectively, as well as St. Thomas Aquinas, a representative of the western scholastic tradition and inheritor of such thought. These men largely based scriptural arguments for this teaching on Deuteronomy 23:19, Ezekiel 22:12, Matthew 5:42, and a few other passages, but I will focus on the patristic quotations because the views expressed them are, in my view, correct expositions of the texts in question, and thus it would be redundant to handle the texts on their own. Based on all this, I will argue that in a Christian society, loaning at interest ought to be limited on moral grounds to the extent it can, and this gap in the financing market ought to be filled by the more ethical Free Loan Societies.
The first point to establish is the illicit status of loaning at interest, which is basically ubiquitous across the Christian tradition up until John Calvin (Brand, 10). This specific prohibition reaches as early as Tertullian and includes many illustrious figures like SS. Augustine of Hippo, John Chrysostom, Athanasius the Great, and Gregory of Nyssa (Maloney, 246). This also bled into the Reformation, with Martin Luther himself fiercely condemning charging at interest (Brand, 10). Though their views varied, the same refrain echoed throughout the centuries: any lending that requires more than the principal in return is usury and thus illicit. Beginning with our eastern representative, Basil, he calls such a practice “the height of inhumanity,” since it involves the poor needing “to seek a loan in order to survive, while others, not being satisfied with the return of the principal, should turn the misfortune of the poor to their own advantage.” In this, he “does not consider human nature,” and this is a huge accusation (Basil, 90). This is not merely a denial of our equality, but from the Judeo-Christian perspective, human nature is in the image of God. Thus, to implicitly reject such a confession is to harm that which God has sanctified and to call Him a liar.
This same accusation is levelled by Ambrose, and he begins with an image of a person whose relatives were captured by barbarians and sold into slavery, only for the lender to look the other way unless paid back in interest, in which case he clearly has no respect for “our common frailty” (Tobia, 3.9). For Ambrose, it’s absurd that one would require additional repayment for such a loan. For one thing, if they have the money and it’s “idle” enough that they can give it away, then they ought simply to give it away, or at least take no more than the principal in return. What’s more, even if you aren’t paid back, there is great virtue in suffering such and thus great reward in heaven, not to mention how “he who does not return money returns thanks” (Tobia, 2.8). [Instead, the rich man “binds him by signatures and holds him to the bond of his word,” and thus “the wretched man is freed from a smaller debt, he is bound by a greater” (Tobia, 3.10). This is a kind of faux help, in which one gives money for the help of their neighbor but then requires even more from him who could not pay the first thing. “He asks for medicine, you offer him poison; he begs for bread, you offer him a sword; he begs for liberty, you impose slavery; he prays for freedom, you tighten the knot of the hideous snare” (Tobia, 3.11). This language is directly reminiscent of the Gospel’s language concerning prayer, in which Christ appeals to the fact that normal people will not give their children a snake. For Ambrose, however, this person acts as a sadistic father would to a poor child.] This faux philanthropy is also symbolically associated with Satan’s own crime against Adam and Eve. When he first spoke to the woman, he “catches with gain, entices with gold,” by which Ambrose refers to the assurance that breaking the Lord’s command would make them like Him (Tobia, 4.12). In this sense, Eve “borrowed sin” from the devil, its owner and master, for the profit he promised. However, in her reception of the forbidden fruit, “Eve indebted the whole human race with the usury of a guilty inheritance.” In this way, Satan “demands our life in exchange for treasure,” requiring more from us than he gave. For the Christian, however, Christ is called “the payer of the debt” even though He “owed nothing to [Satan],” as this “bond” was “blotted out with [Christ’s] blood…(f)or what had been written in characters of death had to be destroyed by death” (Ibid., 9.33).
Another major argument against usury is from natural law, as gaining money from money is simply unnatural. This is actually not unique to the Christian tradition but is a much older idea dating back to Aristotle. The first premise of the argument is that money’s end is in its fungibility—the ability to be exchanged for goods or services. In other words, money is meant to be spent. This is analogous to cake, which is meant to be eaten. One cannot buy the right to “use” cake apart from ownership of the cake; you cannot have your cake and eat it too. The same is then true of money: you cannot sell the “right” to use money, as the end of money is its exchange for a good or service. This is especially relevant for loans, as you generally don’t take out a loan to save money but in order to pay for something you couldn’t already. In this case, you are borrowing money from one who has enough money, and they are then charging you for the right to use the money they gave you. From their perspective, this is “to sell what does not exist, and this evidently…is contrary to justice” (Aquinas, 78.1). From the ancient perspective this seems incredibly unnatural. In his homily on the topic, Basil relates this to natural forms of production. Though plants and animals take time to mature or grow, money immediately begins accruing interest as soon as it is loaned out. Animals either attain reproductive capacity early or keep reproducing late into their lives, but money loaned multiplies immediately and continues until death (defaulting or paying back). In Basil’s words, “have nothing to do with such a monstrous creature” (Basil, 95). While there are more modern economic philosophies around the use money, this view is nonetheless a rather robust and intuitive argument that captures the broad Christian teaching on the matter until a generation after the Reformation.
The most immediate response can likely be summarized in the quippy line, “That was then, this is now.” Dr. Chad Brand, Senior Research Fellow at the Institute for Faith, Work, and Economics, similarly argued “laws prohibiting interest on personal loans made sense in the historical context of the Old Testament,” but that money “became through the process of the economic transformation of the Western world a dynamic force that could be used for the good of society” (Brand, 11). This is a strange claim for a few reasons. While it’s true that economic theory has changed drastically since these ancient times, the actual function of money on the ground level really hasn’t. Today as in ancient times, the function of money is to be exchanged for goods and services, simple as. Risk has indeed become a much more prominent element, but the fathers address this nonetheless with assurance of one’s reward in heaven for giving a loan generously, as addressed previously. In addition, temporal reward is found in the goodwill of the debtor, even if he cannot pay the loan back, since “it is lawful to exact compensation for a loan, in respect of…benevolence, and love for the lender, and so forth” (Aquinas, 78.2). What’s more, the second claim of societal good from the development of interest is a difficult one as well. It’s true enough that the increase in economic development has led to greater innovation and thus a higher quality of life, but this has always been true, with or without interest. Like most tools, money always has the opportunity to do good, but it can obviously be used for evil and injustice just as well. [Within this stream of argumentation, Brand also makes a comparison between the modern allowance of interest due to socioeconomic changes to the modern forbiddance of slavery, even in the face of its permissibility in the context of the Levitical laws and the New Testament commands to obey one’s master. This, however, is to compare apples to oranges. For one thing, slavery actually was discouraged in the New Testament, as when St. Paul encourages slaves to avail themselves of their freedom if possible (1 Corinthians 7:21) and commands a slave owner to receive a runaway slave and Christian convert back “no longer as a slave but more than a slave—as a beloved brother” and to “receive him as you would receive [Paul]” (Philemon 16-17).]
Another thought will likely arise very quickly: “Alright, that’s all well and good, but what’s the alternative? You’ve already said that the modern economy is based on credit and interest-bearing loans.” Well, this too is a path which has already been trod by conservative Jewish and Muslim communities. For the Muslim, this Quranic prohibition is based on the philosophy that it is immoral to make money without risk. For lending at interest, there is really no risk involved, since the person is legally obligated to repay the loan, though of course there’s always a chance of defaulting. Instead, they broadly finance under a murabaha system. This involves a mediator who buys goods from one party only to sell it for a higher price to another. This allows them to make money while taking on the normal risks of selling, and based on Aquinas’ words about speculation we have already discussed, this would seemingly be permissible. But while this system is useful for short-term trade financing, it is less useful for the large-scale needs that many loans are meant to supply for (Lewison, 334-5). For that, we can instead look towards the Free Loan Societies in many Jewish communities around the world. In New York, for example, some smaller ones were associated with synagogues, but there were much larger private ones as well (Tenenbaum, 214). In fact, there are plenty that exist today, like the Jewish Free Loan Association (JFLA) and the Hebrew Free Loan Society (HFLS). These institutions do exactly what their name implies—they offer interest-free loans to those that need them. Originally, their income was based on membership dues and donations, but as of 1920, this was largely replaced by “umbrella organizations that coordinated fund-raising and distributed funds to local organizations,” but donations were still allowed as well (Ibid., 215). In addition, there were two other parties who were required as endorsers so that they would pay if the primary party defaulted. As a result, these loans were paid very reliably, with an annual default rate of less than one percent (Ibid.). It’s also important to remember, these are not normal charitable organizations which simply give money to those in need, but they instead are based on loaning money out. As a result, if they have such a low default rate, they will seemingly lose very little, and with a consistent stream of donations from the fund-raising organizations, inflation would be a very little worry. For our purposes, because these are non-profits, donation to these institutions would also be tax-deductible, which would create an even greater incentive for donating. Another major benefit to this system, especially for the poor, is that these institutions will often provide smaller-sum loans, still at little interest. Pawn shops, some of the only institutions where the poor can actually get loans when they have little to no credit, often have loan minimums at $1000, and the rent-to-own industry can charge 350-450% in interest on things ranging from microwaves to couches to refrigerators (Lewison, 329). Free Loan Societies, on the other hand, can provide legitimate small-scale loans that will build credit while also being interest-free.
Free loan societies also have a huge potential to thrive in the modern market, especially with the rise of crowdfunding. This has become a huge method for those with little access to medical care and other needs to get funds, and it is entirely based in charitable giving. One of these sites, GivingForward, raised $65 million in donations for fifty thousand healthcare-related campaigns from 2008 to 2013, and there are many stories for all sorts of cases from sites like GoFundMe (Snyder, 36). One major drawback is that these larger charitable organizations are not as individually impactful as a GoFundMe page may be, though this can be somewhat mitigated by using individual testimony in advertising (Ibid., 37). However, many of the drawback are not met. Fraud and misinformation is a huge problem with crowdfunding, since there often is little verification involved (Ibid.). However, these societies would obviously screen their clients heavily beforehand and have historically had very low default rates. The heavy reliance on spectacle is also avoided by such a screening process as well, and both the efficiency of charitable organizations and the privacy of interviewing for a loan are also ensured more so than current crowdfunding efforts (Ibid., 39). In this way, the Free Loan Society would be able to capitalize on the crowdfunding trend to bring aid to more people while also having minimal risk for the organization’s success.
To retrace our steps, we have surveyed the classical Christian confession concerning lending at interest and usury, which was very negative, seeing the practice as a Satanic abuse of the poor and an unnatural abuse of money itself. We then analyzed the counterargument of changing economic times and gave an existing interest-free alternative in the Free Loan Society. Finally, we looked at how the advent of more Free Loan Societies would be able to capitalize on the modern trend of crowdfunding to achieve success. In the end, I think this well showcases the moral problems from the Christian perspective and how this is solved by the Free Loan Society.
Works Cited
Ambrose of Milan. De Tobia. Translated by Lois Miles Zucker, The Catholic University of America, 1933, https://babel.hathitrust.org/cgi/pt?id=wu.89097193437&seq=1. Accessed 07 May 2024.
---. On the Duties of the Clergy. Translated by H. de Romestin, E. de Romestin and H.T.F. Duckworth, New Advent, https://www.newadvent.org/fathers/3401.htm. Accessed 07 May 2024.
Basil the Great. “Against Those Who Lend At Interest.” On Social Justice, edited by John Behr and translated by C. Paul Schroeder, St. Vladimir’s Seminary Press, 2009, 89-99.
Brand, Chad. “Usury in Scripture.” Institute for Faith, Work & Economics, https://ifwe.wpenginepowered.com/wp-content/uploads/2015/03/Usury-Brand.pdf. Accessed 07 May 2024.
Nicaea, Council of. Translated by Henry Percival, New Advent, https://www.newadvent.org/fathers/3801.htm. Accessed 7 May 2024.
Lewison, Martin. “Conflicts of Interest? The Ethics of Usury.” Journal of Business Ethics, vol. 22, no. 4, 1999, pp. 327–39. JSTOR, http://www.jstor.org/stable/25074211. Accessed 7 May 2024.
Maloney, Robert P. “The Teaching of the Fathers on Usury: An Historical Study on the Development of Christian Thinking.” Vigiliae Christianae, vol. 27, no. 4, 1973, pp. 241–65. JSTOR, https://doi.org/10.2307/1582909. Accessed 7 May 2024.
Snyder, Jeremy. “Crowdfunding FOR MEDICAL CARE: Ethical Issues in an Emerging Health Care Funding Practice.” The Hastings Center Report, vol. 46, no. 6, 2016, pp. 36–42. JSTOR, http://www.jstor.org/stable/44159348. Accessed 7 May 2024.
Tenenbaum, Shelly. “Culture and Context: The Emergence of Hebrew Free Loan Societies in the United States.” Social Science History, vol. 13, no. 3, 1989, pp. 211–36. JSTOR, https://doi.org/10.2307/1171370. Accessed 7 May 2024.
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