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How can modern banks and businesses function if money cannot be lent or borrowed with interest? A rabbinic document called a heter iska (literally: business permission) addresses this problem. It structures business transactions as investments for which there is no interest but rather profit-sharing. One side provides the funds and the other puts in the time and effort that will make the investment grow. For example, a lending institution invests in a factory so that the factory owner can buy additional equipment. The factory’s earnings will increase, and the two sides will share in the profits. To avoid complications, the percentage the investor will receive is agreed upon in advance. Similarly, young adults accepted to a training program for an in-demand profession, but do not have the money to pay tuition, can turn to a lending institution to invest in their studies using the heter iska framework. When they finish their studies and begin earning money, they return the investment along with part of the earnings. It is important that use of the heter iska does not cause us to forget the important mitzva of interest-free loans for those in need.
