Is Charging Interest Sinful?

"There is one bit of advice given to us by the ancient heathen Greeks, and by the Jews in the Old Testament, and by the great Christian teachers of the Middle Ages, which the modern economic system has completely disobeyed. All these people told us not to lend money at interest: and lending money at interest – what we now call investment – is the basis of our whole system. Now it may not absolutely follow that we are wrong.... This is where we want the Christian economist."
– C.S. Lewis, "Mere Christianity"

In an age of subprime mortgages, credit cards, and payday lending, it's hard to imagine that charging any interest was once considered immoral. Yet like many ancient moral leaders, Moses commanded, "If you lend money to any of my people who are poor, do not … require him to pay interest." (Exodus 22:25, Good News Translation).

Interest is what fuels savings and investment. Without interest, borrowing – from home loans to bonds – would virtually disappear. Most of us today don't lend to the poor. Rather, we "lend" to the very rich: When we buy bonds or set up a savings account, we give banks and government our money, expecting a modest rate of return in exchange. Does Moses' injunction apply in such cases? If so, is our modern economy intrinsically sinful?

After 20 years of thought, prayer, and practice in the financial industry, I'm convinced that interest can be an important part of financial and spiritual blessings. But a distinction must be made between lending for charity and lending for investment. When we help a neighbor in need – and the Bible says we are obliged to do so! – we ought not seek financial profit. But when we lend to boost a neighbor's productivity, a return on investment is sound.

This distinction isn't always recognized, which explains the usury laws and prohibitions on "excess" profit that persist today. An extreme example comes from Robert Wuthnow's book, "God and Mammon in America." In 1639, merchant Robert Keayne was censured by his Boston church and convicted in court for earning 6 percent profit, two points above the limit.

That concern over greed is alive today. Many cities are passing laws to cap the interest that payday lenders can charge. Washington wants to lower interest rates for troubled homeowners. Politicians complain about price gouging by Big Oil, and threaten a windfall-profits tax. But the "evils" of interest rates cut both ways: America is suffering the consequences of easy money – where interest rates stayed too low for too long, encouraging speculation in housing.