One component of Old Testament (OT) economic social justice was providing interest-free loans for the Israelite working poor. But does the Old Testament (OT) require only interest-free loans? Or, does the OT permit other loans that can charge interest? Well, that’s where key differences arise.

Both Exodus 22:25 and Leviticus 25:35-37 state clearly that the interest-free loan is specifically for the poor in need. But when Deuteronomy 23:19-20 prescribes interest-free loans, it does not include a specific reference to the poor. Instead, it seems to extend the ban to the broader category of an Israelite “brother.” Yet it does permit Israelites to charge interest on loans to the “foreigner” (underlines added for emphasis):

“You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest. You may charge a foreigner interest, but you may not charge your brother interest, that the LORD your God may bless you in all that you undertake in the land that you are entering to take possession of it.”

 The contrast between “brother” and “foreigner” can be explained in three different ways:

• View #1: It’s an ethnic distinction in which the “foreigner” is a non-Israelite enemy of war (those God deemed “devoted to the Lord for destruction” such as Jericho, Josh. 6:17-21) with whom you can charge interest as a hostile action.
• View #2: It’s an ethnic distinction with a two-tiered ethic. Among Israelite “brothers,” one takes the higher moral ground by charging no interest on any loan to each other; whereas with non-Israelite “foreigners” it is morally legitimate to charge interest on business loans.
• View #3: It’s an economic distinction between the working poor (“brother”) and the merchant (“foreigner”). In this view, Israelite lenders can legitimately charge interest on loans to each other but not on loans for subsistence living assistance to the working poor.

What Does the Old Testament Say About Loans that Charge Interest?

View #1 was the dominant interpretation through most of the early church and medieval periods, however it is very difficult to support biblically, since Deuteronomy 23:20 permits interesting-bearing loans with “foreigners.” OT scholar David L. Baker clarifies,

“The context of these laws [regarding a ban against loans with interest] in the Book of the Covenant [Exod 22:25] and Holiness Code [Lev. 25:35-36] is exploitation of the poor, so it does not follow that it is forbidden to lend at interest to the rich. From ancient times there has been a distinction between productive loans, providing capital for trade or investment, and unproductive loans, which are made to supply immediate need.”

Even Jesus affirmed earning interest when putting one’s money in the bank (Matt. 25:27; Luke 19:23).

Views #2 and #3 agree that charging interest on loans is a morally legitimate transaction within certain contexts, but they disagree about which contexts are intended. View #3 states that in Deuteronomy 23:19-20, interest-free loans are specifically for the poor but not for all lending transactions among Israelites (which is the context for View #2).

In essence, View #3 affirms that all of the three OT passages offer the same teaching on these two categories of loan, that,

1. Israelites must not charge interest on subsistence living assistance loans to the working poor and needy.
2. They may charge interest on loans to fellow Israelites and non-Israelites for other purposes, including for commerce.

Why Interest-Free Loans Are Only for the Working Poor for Subsistence Purposes

Three main points, considered together, offer support for View #3:

• There is other biblical support for interest-free loans to the poor. An earlier section in Deuteronomy (15:7-11) treats the subject of lending and the poor brother, but there is no explicit mention of lending without interest at that point. The reference to lending and the poor brother in Deuteronomy 15:7-11, then, also applies to a follow-up discussion in Deuteronomy 23:19-20 where the purpose is to clarify that loans should be interest-free. Both sections together provide the relevant information.
• If loans to the poor for subsistence living must be interest-free, then charging interest to others must be allowed. The two ideas of (a) loans without interest for the working poor and (b) loans with interest for other purposes are evident in these main OT passages.

OT scholar Walter Kaiser clarifies an interpretive guideline to follow in studying OT law, “When an evil is forbidden in one of the commandments [or in our case, an action is restricted], its opposite good must be understood as being encouraged.” Both Exodus 22:25 and Leviticus 25:35-37 explicitly teach the first idea. Accordingly, that also implies that interest can be charged by Israelites on loans to Israelites for other purposes, the second idea. And, the second idea is explicitly stated in Deuteronomy 23:20, that Israelites can charge interest on loans with a “foreigner,” which most scholars agree refers to a foreign merchant or trader here.

• Protecting the poor is the context of the text. The Hebrew noun for “interest” (a total of 12 OT uses), which occurs three times in Deuteronomy 23:19-20, has a clear contextual focus of protection for the poor in almost all the other OT uses.

OT scholar Mark Biddle summarizes the economic status distinction of View #3,

In fact, since most traders in the ancient Near East did business internationally, the permission to charge interest of ‘foreigners’ may be understood less as a form of ethnocentricity and more as drawing a distinction between lending to the needy in one’s community and credit as a component of commercial transactions.

Exodus 22:25, in the NIV, makes this point clearly, “If you lend money to any of my people who is needy, do not treat it like a business deal; charge no interest.”

Editor’s note: Read Dr. Issler’s full article on the topic, “Lending and Interest in the OT: Examining Three Interpretations to Explain the Deuteronomy 23:19-20 Distinction in Light of the Historical Usury Debate,” published by the Journal of the Evangelical Theological Society.

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