Zero interest? And we’re not on a used car lot?

With so much concern being placed on how to get what’s yours in our failing economy, it is refreshing to see that some people are still able to count their blessings and bestow them on others. Despite a vast decline in charitable donations, faith-based lending services are thriving. The best part? No interest.

The Chaya Mushka Lubavitcher G'Milus Chesed group, a Jewish community organization, typically makes loans of up to $1000 interest-free. This Pennsylvania firm is not alone – many other Jewish groups lend with budgets ranging from the tens of thousands up to $20 million. What is interesting is not so much how the loans work (much like microloan operations in Africa, just without interest), but why people, specifically Jews, choose to lend when budgets are already tight.

According to a rabbi working with the Lubavitcher group, this loan is a ‘mitzvah’ or a good deed that will be a blessing upon both parties. The borrowers and lenders have an intrinsic trust based on the religious and personal nature of the loan. Because it is more of a favor than a business transaction, borrowers tend to default less frequently, seeing repayment as a moral and religious imperative, rather than a contractual obligation.

These organizations operate with little or no public relations staff, relying on word-of-mouth advertising to those in need within their respective communities. According to the article, the lenders and borrowers often know each other and send personal notes of gratitude when the purpose of the loan (i.e. college tuition) has been accomplished.

Would this project work on a much larger scale? Doubtful. The difference between loans within the Jewish community and within the world of everyday banking is the personal nature of the process and the direct and undeniable tie to religious obligations. Currently, the system tends to help those who are invested in the process and feel obligated to repay their loans, but if the system was expanded into a more formal setup, it would require profit and safeguards and become…the American consumer loan system.

Religious organizations are undoubtedly good in our current economy, but attempts to expand them past their natural communal borders should be viewed cautiously. Each community requires a different solution to an individualized problem. This solution may be mitzvah loans in a Jewish community, or it may take another shape elsewhere. Blanket condemnation or support of the role of religious organizations during an economic downturn is not helpful, but neither is forcing a pre-formed, packaged solution onto a unique problem.

Philadelphia Enquirer Story