Mr. Rubin sat across from Mr. Goldstein in his office, papers spread out before them. His small business was growing steadily, but to expand he needed a substantial infusion of capital.
“I’m looking for a $100,000 interest-free loan,” Mr. Rubin explained. “It would allow me to scale up operations and, G-d willing, increase profits significantly.”
Mr. Goldstein considered the matter thoughtfully. “I’m open to lending to you,” he finally said. “It’s a worthwhile opportunity. But I have one condition.”
Mr. Rubin leaned forward. “What do you have in mind?” he asked.
“There’s a yeshiva very close to my heart,” Mr. Goldstein answered. “If I extend the loan, I’d like you to donate something monthly to it.”
“I give ma’aser kesafim regularly,” Mr. Rubin said. “Allocating some of it monthly to your yeshiva is fine.”
“Excellent!” Mr. Goldstein replied. “Then we can proceed.”
Mr. Rubin hesitated, though. “I just need to clarify something,” he said. “Since the condition is tied to the loan… is there any concern of ribbis?”
Mr. Goldstein raised an eyebrow. “Ribbis?! You’re not paying me anything extra,” he responded. “The money goes to tzedakah, not to me!”
“True,” said Mr. Rubin. “Still, it’s something I’m doing because of the loan.”
Mr. Goldstein shrugged. “People support yeshivos all the time,” he said. “This is tzedakah you’d be giving anyway. I don’t see how it could be a problem.”
Mr. Rubin remained unsure. “Perhaps,” he said. “But since I’m donating at your request as a condition to the loan, maybe that changes things.”
Mr. Rubin decided to contact Rabbi Dayan and asked:
“Is there a concern of ribbis in this arrangement?
“The Gemara (B.M. 69b) teaches that the Torah prohibited ribbis only when the lender benefits from the borrower himself,” replied Rabbi Dayan.
Thus, Rava permits a third party to offer money to the lender to induce him to grant a loan to the borrower. Although the lender gains, he does not benefit from the borrower himself (Y.D. 160:13).
Conversely, Rava permits the borrower to offer money to a third party to secure him a loan. Although the borrower pays, the lender does not benefit from him; the third party just receives his broker’s fee (Y.D. 160:16).
However, the broker may not, in turn, offer money to the lender to grant the loan, lest people use this ha’arama as a deceitful workaround for paying ribbis (Rema Y.D. 160:16).
Moreover, Tosafos (B.M. 57b s.v. lesapek) and Mordechai (B.M. 328) write that the lender may not instruct the borrower to pay money to a third party as a condition to receive the loan; that may be ribbis d’Oraysa. Although the borrower does not pay the lender himself extra, paying the third party upon the instruction of the lender is considered as benefiting him. This is true even if the lender instructs the borrower to give to hekdesh (Temple treasury) or tzedakah (Y.D. and Rema 160:14).
This is similar to other areas in halacha (e.g., arev, kiddushin) in which payment to a third party upon a person’s instruction is like giving benefit to that person (see E.H. 29:2).
Radbaz (#2306), however, permits granting a loan so that the borrower will give tzedakah. He maintains, against Tosafos, that giving to a third party is not considered ribbis d’Oraysa as if benefiting the lender. Although the Sages prohibited it between regular people, they allowed it for the purposes of tzedakah to benefit the needy (Darchei Teshuvah Y.D. 160:106).
The Radbaz’s leniency, though, is not accepted by other Acharonim (Bris Yehuda 6:10[29]; The Laws of Ribbis 4:20). Furthermore, Oneg Yom Tov (#89) qualifies that even Radbaz allowed this only when stipulating to give tzedakah in general, but not to a specific needy person or cause.
Thus, Mr. Goldstein cannot stipulate that the loan is given on the condition that you donate to his yeshiva, since this is like giving him benefit.
“Regardless,” concluded Rabbi Dayan, “if the desire to use the loan money for tzedakah is the borrower’s and is not taken by the parties as a tacit condition for the loan – as commonly occurs when someone wants to give tzedakah but is short on cash and borrows from his friend – clearly that is permissible, since then the borrower is not giving the tzedakah at the bidding of or for the benefit of the lender (Rema Y.D. 160:14; Bris Yehuda, ibid.).”
Verdict: The Torah prohibited only ribbis given from the borrower himself to the lender. However, doing the lender’s bidding, even donating to a needy person or tzedakah cause, is also considered giving him benefit and is prohibited.