Interest-free loans steeped in tradition
By Kristin E. Holmes
The Philadelphia Inquirer
June 10, 2009
In tough economic times, a centuries-old financial lifeline might be one of the best-kept secrets in the Jewish community.
It is a secret whose roots go back to the Torah, where it is called an act of "lovingkindness."
When rent is due or tuition is short, there are loans available for thousands of dollars -- interest free.
The programs are part of a tradition in the Jewish community of offering loans without interest to people in need. The money has helped families adopt babies, a woman buy a pacemaker, and immigrants start a new life.
"I was going to Israel, and I just needed some extra money," said Yaron Gola of Northeast Philadelphia. "It was a tremendous blessing. It makes you feel a part of a community."
About 50 groups in the United States and abroad lend millions in interest-free loans each year, said Mark Meltzer, past president and cofounder of the International Association of Hebrew Free Loans.
In the region, the Hebrew Free Loan Society of Greater Philadelphia in Elkins Park and the Chaya Mushka Lubavitcher G'Milus Chesed in Northeast Philadelphia are two of the independent organizations that carry on the tradition.
Jewish nonprofit groups also offer small interest-free loans, often for educational pursuits.
It is viewed as a mitzvah, a good deed, said Rabbi Zalman Lipsker, director of the Lubavitcher fund. In fact, G'Milus Chesed translates to "deed of lovingkindness" in Hebrew.
The underlying principle goes back to biblical instruction, said Rabbi Aaron Landes, founding rabbi of the Hebrew Free Loan Society of Greater Philadelphia and rabbi emeritus of Beth Sholom Congregation, the society's headquarters.
Exodus 22:25 says, "If you lend money to one of my people among you who is needy, do not be like a moneylender; charge him no interest." Similar instructions are in Deuteronomy and Leviticus.
"When immigrants came over from Eastern Europe between 1880 and 1914, they brought these associations with them," said Shelly Tenenbaum, author of A Credit to Their Community: Jewish Loan Societies in the United States.
Other ethnic and religious groups have their own loan programs. Interest is prohibited in Islamic law and references to the law appear in the Quran and in statements of the prophet Muhammad, said Masood Ghaznavi, professor emeritus at Rosemont College.
Among the Hebrew loan societies, organization assets range from $100,000 to more than $20 million. Groups vary with respect to professional staffing, business partnerships, and annual lending, Meltzer said.
The first Jewish immigrants to the United States "got $25 to get their pushcart," said Tamar Granor, who with her husband, Marshall, runs the Hebrew Free Loan Society of Greater Philadelphia.
A bond of mutual trust linked the society, the borrower, and his or her cosigner. Each borrower usually must have at least one.
"It's one thing to default on an impersonal institution," Tenenbaum said. "It's another to default on someone you're close to."
The process is designed to be dignified and devoid of embarrassment, so applications can be brief. The Lubavitcher group, which typically lends up to $1,000, doesn't ask a reason for the loan. The Hebrew Free Loan Society requires a credit check of the cosigner, but not the applicant. The group lends a maximum of $5,000. Terms for payback vary.
Default rates were typically lower than those of banks, Tenenbaum said. Some borrowers have failed to pay the Lubavitcher group, Lipsker said. Fewer than 1 percent at the Hebrew Free Loan Society of Greater Philadelphia have defaulted. Court action is extremely rare, Tamar Granor said.
The Northeast Philadelphia program, with rolling assets of $150,000, has been in operation since the early 1970s. In Elkins Park, the Free Loan Society celebrates its 25th anniversary this year. The group has assets of $350,000.
Both organizations rely on contributions and fund-raising to replenish the money.
As the economy has worsened, loan inquiries have started to increase. But Marshall Granor, whose parents, Bernard and Marie, helped start the fund, is surprised that more applicants haven't turned to the society. He has money to lend but no takers.
"It's been hard to connect with people," he said.
With only a volunteer staff, public relations isn't often a priority. The group's members hope to hire a part-time worker who can help spread the word.
Said Granor: "It's a tremendous feeling when a parent calls and says, 'My son graduated from Drexel, and I couldn't have done it without you.' "
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