Why is it Permitted to Charge a Non-Jew Interest? 

Harav Chaim Weg, Rosh Kollel of Kollel Zichron Gershon L’Dayanus

Question:  My non-frum acquaintance wanted to borrow money and I explained that a heter iska would be needed because a Jew may not lend money to a fellow Jew with interest. He asked me to explain why a Jew is only forbidden to charge another Jew interest, but may charge interest to a non-Jew. How does this differ from gezel akum, stealing from a non-Jew, which is completely forbidden?

Answer: There is a very fundamental difference between charging interest and stealing. When one steals someone’s money, he is taking something away from him without his permission. It is forbidden to do this to anyone. Whereas, when one charges a borrower ribbis, the lender agrees to pay the interest and is often happy to do so in order to get the loan. Since he gives the interest willingly, there is no reason not to take ribbis from a non-Jew. 

This leads us to the question of why the Torah forbids lending with ribbis to a fellow Jew. 

Of course, we do not claim to know the reasons for all the mitzvos in the Torah, but the Rishonim and Acharonim do discuss the reason for the prohibition of ribbis. 

The Ramban explains that the foundation of the prohibition of ribbis is the mitzvah of chesed. He says that brothers go above and beyond to do acts of kindness for each other; therefore, one should be kind to his brother, i.e., his fellow Jew, and not charge him interest. The Maharal says similarly that brothers do not charge each other interest when they lend money, and one should treat every Jew like a brother. 

The Kli Yakar says that the mitzvah of ribbis is supposed to be a lesson in bitachon. When one engages in business, he has to have bitachon in Hashem that his deals will be successful. But when one lends with ribbis, he feels that his income is guaranteed. This leads to a lack of bitachon in Hashem. For this reason, ribbis is prohibited when lending to a Jew. When lending to a gentile, however, this guarantee doesn’t exist, as many gentiles do not repay their debts; therefore, the prohibition is unnecessary. 

The Gemara says that although it is permitted to lend money with interest to a non-Jew, the chachamim decreed that it is forbidden to do so because it will lead to interacting in a business setting with him, which will cause one to learn improper practices from him. The only exceptions to this rule are if the lender is a talmid chacham who will certainly not be improperly influenced by non-Jews, or if the lender needs this money for his basic parnassah. 

The Shulchan Aruch says that this prohibition of Chazal does not apply today. The Rishonim offer several reasons for this. 

1. First of all, they say that Chazal only prohibited a person from making extra, supplemental income by lending with ribbis to a non-Jew. In contemporary times, however, when the cost of living is high, no income is considered “extra.” Whatever money a person makes is considered essential, and Chazal never prohibited lending to a non-Jew with interest when the earnings are needed on a basic level. 
2. A second reason offered by the Rishonim is that Chazal only enacted this prohibition for a time when Jews lived separately from non-Jews and they wanted to limit their business interactions to Jews only so as not to learn from the behavior of the non-Jews. In contemporary times, however, Jews live together and do business together with non-Jews in any case. It is not possible for all Jews to make a living from dealing only with Jews. Since Jews are interacting with non-Jews in all forms of commerce, the underlying reason for the prohibition no longer applies.