In the Old Testament we find that there are prohibitions on lending with interest, and there is a clear and explicit instruction that this should never be the case for the poor, being the most vulnerable and those most likely to seek financial assistance from those who might take advantage of them. It was permitted, however, for an interest charge to be made when money was loaned to those who were not Israelites. It was important that the Jewish people dealt with one another as brothers, and so loaned generously and without expecting anything more than they had loaned from those they supported in this way.
By the time of the first century and the increasing development of a Rabbinic Judaism there were still strict restrictions on lending with interest to those who were Jews. It was understood that there were some exceptions or clarifications. If person A lent 1000 to person B for a business venture he could not ask for 1100 at the end of the loan period. But if person A lent 1000 to person B and he bought a quantity of grain and at the end of the loan this grain was now worth 50% more than it had been when purchased then person A could share in that profit because he had, in a sense, loaned the grain by lending the money to purchase it. It was also permitted to loan money by becoming a true investor and sharing the risks of any business venture, so that if it was profitable then the profit would be shared, and if it was a failure then the loss would also be shared. The intention was to prohibit lending money so that there was no shared risk, and that all of the potential loss belonged only to the one borrowing the money.
The Lord Jesus did not discuss usury and interest in any great detail. But he insisted that those who were tax collectors should only take what was due and not inflate their income, and he said,
And if you lend to those from whom you hope to receive back, what credit is that to you? For even sinners lend to sinners to receive as much back.
Love your enemies, do good, and lend, hoping for nothing in return.
These also supported the Old Testament Jewish idea that lending while expecting to make profit, especially from those in need, was forbidden, or at least not worthy.
The Greek philosophers had a similar view as they developed idealistic social models. Aristotle said that money was barren and should not be used to produce more money. There was nothing wrong with lending to those who had need, especially when it was not expected that such a loan would be repaid. There was nothing wrong with lending to a merchant to allow him to conduct a business venture, not even sharing in the risk and profit by becoming a true shareholder. But to make money from money while doing nothing was not a virtue according to the philosophers.
Nevertheless, Roman society and law allowed usury, lending with interest. The Roman authorities did set limits to what was just to prevent excessive rates of interest, but the pagan Romans accepted the idea.
The Christian Church inherited the Old Testament, and Greek philosophical, view. Many of the saints wrote against usury and against lending with interest. It was never forbidden to lend money, and this could be an act of charity. Several saints are described as lending money in such a way, but they did not demand or expect repayment, and they did not apply any interest charges. In the 4th century the Council of Nicaea forbade clergy from lending money with interest and ordered that those who did so should be removed from the ranks of the priesthood.
Over the next centuries the Church in the East and West continued to preach and make rules against lending money with interest. But there were always those who wanted to do so, and always those willing to borrow under such terms. Not everyone in a Christian empire is Christian, and not every Christian is as sincere and committed as they might be. Nevertheless, even in the Middle Ages in Italy, those who lent money as their business were excluded from communion and were not considered to be members of the Church in good standing. The Catholic Church continued to object and oppose lending with interest until the 19th century.
In the East it was recognised that some controlled lending, especially for business ventures, was better than none, and so the old Roman idea was slowly accepted, though not without a great deal of continuing criticism. At the beginning of the 10th century in the Byzantine Empire, Leo VI allowed lending with interest no higher than about 6% for most loans, with loans for high-risk mercantile ventures allowed at 12%. It was accepted that the previous laws prohibiting interest were wonderful, but that “The nature of man has not reached the heights at which this law obtains.”
In the East and West people found ways around the law and the clear teaching of the Church, which had not changed. It was possible to disguise interest as a late payment fee for instance. But there were always those willing to lend at interest even in an open manner and while being condemned for their activities.
It was the Protestant movement in the West which began to allow lending with interest, and redefined usury to mean lending at a high interest rate. By the 17th century most Protestant groups had not only allowed lending with interest but wholeheartedly supported it, and even considered the generation of wealth as a sign of God’s favour. The modern experience of cheap credit, and of pay-day loans, is rooted in this change of attitude which the Protestants introduced, and which the agnostic and atheistic social philosophers and economists of the 18th and 19th century developed, Some, such as Bentham, believed that there should be no control over the rates of interest permitted, so that the market and supply and demand were left to fix them, but this seems to ignore the fact that the most desperate will always submit to the most onerous of conditions, and it was exactly this that the Jewish and Christian objection to usury intended to address.
Islam did adopt some of this same idea, which is not surprising since so much of Islam is derived from forms of Judaism and Christianity. But in fact, in the Ottoman Empire, it proved just as difficult to impose the definite teaching that money should not be lent on interest. The Muslims in the Ottoman Empire allowed lending at anything up to 20% interest before it was considered usury or riba. The modern focus in Islam on forms of finance that do not involve lending at interest but do allow profit is not one which the Muslims of the past would have understood since they made a clear distinction between lending with interest and lending with excessive interest and forbade only the latter.
Christians continue to be interested in how economies can work in a Christian manner, and how the most vulnerable and desperate can be supported without being taken advantage of. The Friendly Societies, the Building Societies, and Co-Operative Societies which developed in the UK in the 18th and 19th centuries were intended to be a means of groups of people being able to provide financial support and credit in a way that was not exploitative. The Christian ideal of general opposition to usury remains though our modern economy is much more complicated than in the past. Even taking out car insurance can include borrowing with interest, and even our ordinary shopping experiences can include a hidden component of borrowing with interest that we are not aware of. It is entirely reasonable to consider how money has a different function in our modern society, and most of us do not have gold bars in a treasure chest in our house, most of us do not even have much or any money in our wallet at all. But that is no reason not to be concerned with how our financial and economic structures can be positive and can also be very negative.
It is not possible for the Church to demand different structures in our modern world, but it is proper to keep asking how the teaching against usury, and especially against exploiting the vulnerable and desperate are to be applied.