In last week’s article, we explained that for the purpose of loans, foreign currency is considered a commodity, but it’s permitted to calculate the value of a foreign-currency loan in local currency and return that amount.
Thus, in our scenario last week, a woman in Israel, Mrs. Fine, borrowed dollars from her parents (who also lived in Israel) and arranged to repay them the shekel value of the loan, which is permissible according to halacha.
At a later point, though, Mrs. Fine needed to borrow even more money and approached her brother. He agreed to loan her $10,000 and wanted the loan paid back in dollars.
“But Rabbi Dayan said that can be problematic,” said Mrs. Fine. “Foreign currency is considered a commodity and the Sages prohibited lending commodities lest they increase in value and the lender and borrower would appear to be violating the prohibition of ribbis.”
Mrs. Fine decided to call Rabbi Dayan to ask him what to do. After considering the question, Rabbi Dayan said, “Since foreign currency is halachically considered a commodity, a loan of foreign currency is subject to the rules of commodity loans.
“In general, Chazal prohibited borrowing a commodity and repaying with a commodity if it isn’t evaluated at its monetary value lest the commodity rise in value and the borrower returns something of greater value than he received (se’ah b’se’ah). Nonetheless, they allowed such loans in a number of situations.
“The first situation concerns a borrower who already possesses some of the commodity – a situation known as ‘yesh lo.’ In such a case, we view the loan as correlating to the commodity the borrower currently possesses so that it’s theoretically an immediate exchange of goods. The borrower gets an apple, let’s say, which he immediately theoretically replaces with his own apple so that the lender and borrower are in a sense exchanging apples rather than lending or borrowing.
“This law applies even if the amount of commodity the borrower owns is small relative to the loan since each part of the loan is seen as being lent against the commodity in the possession of the borrower. If the borrower doesn’t own any of the commodity, the lender can give him a little of it, and, based on that, grant him the loan (Yoreh De’ah 162:2).
“Thus, if the borrower owns some of the foreign currency – or if the lender gives him some – he can borrow the foreign currency and repay that amount of foreign currency even if its value later rises (Toras Ribbis 19:5).
“The second situation concerns a commodity that is readily available at a fixed price – a situation known as “yatza hashaar.” In this case, the borrower can easily acquire an equivalent amount of the commodity so it’s comparable to ‘yesh lo’” (Yoreh De’ah 162:3; Bris Yehudah 17:16).
“Some authorities apply this exception to foreign currency since one can easily acquire foreign currency at a currency exchange and there’s a fixed rate (Shevet Halevi 3:109).
“However, many authorities question this ruling since a stable, fixed price is necessary and currency rates fluctuate daily. So while they agree that the leniency of yesh lo applies to foreign-currency loans, they maintain that the leniency of yatza hashaar does not” (Bris Yehudah 20:3; Bris Pinchas 16:7; The Laws of Ribbis 14:14).