Tzedaka- Who gets what?

When it comes to the mitzvah of tzedaka, the usual topic of discussion is the amount that a person is obligated to give. The question is important, but sometimes redundant thanks to ingrained Jewish generosity. Often, the more relevant question is who to give to, and how to divide available funds.

Replenishment of the deficit

The truth is that the two questions are interrelated. When discussing the amount one is supposed to give, it is common to skip out a crucial stage. The primary factor for determining the amount one is supposed to give is the needs of the poor person (or persons) involved. We are commanded to replenish what he is missing.

This point is clear from the way that the Torah commands us to give tzedaka. We are told:

כִּֽי־יִהְיֶה בְךָ אֶבְיוֹן מֵאַחַד אַחֶיךָ בְּאַחַד שְׁעָרֶיךָ בְּא֨רְצְךָ אֲשֶׁר־יְיָ אֱלֹהֶיךָ נֹתֵן לָךְ לֹא תְאַמֵּץ אֶת־לְבָבְךָ וְלֹא תִקְפֹּץ אֶת־יָדְךָ מֵאָחִיךָ הָאֶבְיוֹן. כִּי־פָתֹחַ תִּפְתַּח אֶת־יָדְךָ לוֹ וְהַעֲבֵט תַּעֲבִיטֶנּוּ דֵּי מַחְסֹרוֹ אֲשֶׁר יֶחְסַר לוֹ.

דברים טו, ז-ח

"When you have a destitute person among you, one of your brothers in one of your territories in your land that Hashem your G-d gives you, do not harden your heart and do not close your fist from your destitute brother. Rather, open your hand to him, or lend him, enough to replace what he is lacking."

Devarim 15:7-8

Accordingly, the Rambam opens his codification of the laws of tzedaka by stating that there is a positive mitzvah to give according to what is fitting for the poor person. One sees such a person requesting funds and averts his eyes from him or otherwise avoids giving him, transgresses the negative command above.

The Rambam adds a caveat that the above is true if the prospective giver can afford to give such an amount, and proceeds to delineate how much one is supposed to give if he cannot afford it.[1] This secondary discussion is the one that usually gets most concentration, probably based on the assumption that we will never be able to replenish the needs of all the poor. However, as we shall see, there are many practical ramifications of the primary discussion- what is 'enough to replace what he is lacking'?

The gemara (quoting a B'raisa) tells us that we are only obligated to sustain a poor person, not to make him rich. On the other hand, the personal language used by the Torah indicates that what he is lacking is subjective. If a person had become accustomed to the use of a horse to ride on and a servant to run in front of him (in our terms, a car and a housekeeper) and subsequently fell destitute, we must provide these things for him (if funds allow).[2]

One who refuses to sustain himself

The tana'im dispute what we are supposed to do when someone has money, but goes on hunger strike insisting that others provide for his needs. One view is that despite this unacceptable behaviour, we don't let him die. We give him food, and after his death we reclaim the expenditure from his property (if we collected from his property beforehand, he would no longer agree to accept the charity). However, the halacha follows the opposing view, that it is not our responsibility to care for such a person.[3]

Such extreme cases are rare. A more pertinent question is what to do when someone genuinely doesn't have enough money to support himself, but has the capability to work and earn enough money. It seems that we have no right to ignore the needs of such a person, otherwise the gemara would have extended the exemption of the previous case. However, it does not seem reasonable that we should implicitly condone such behaviour.

I believe that the resolution of this lies in the fact that there are many different ways to give tzedaka. The Rambam famously lists eight levels of giving tzedaka, the highest being enabling the poor person to be self-sufficient. He offers several ways of doing this, depending on the needs of the person involved. He might need a donation or loan (in order to start a business), or he might just need a business partner or job.[4]

When someone collects tzedaka, the easy option is to say "He should be working and not be dependent on others." Often it may even be true that the person should be doing more to help himself. However, this does not exempt us from our obligations towards him. If we think he should be working, the best thing to do is to help him find a job or start a business (which ever he prefers). If we make a genuine offer to provide such help but he is not interested, we are not obligated to help perpetuate his dependence on others.[5]

Communal funds and taxes

The Torah (shebichsav) only addresses the mitzvah of tzedaka to the individual, presumably in order to stress the personal responsibility that we all have. However, for practical reasons, communal bodies have been entrusted with the collection and distribution of tzedaka at least since the times of the Mishna.[6] Most individuals are not capable of determining whether each collector is genuine or not, and what exactly his needs are. Furthermore, in times where Jewish communities had autonomy, the official collectors had the power to decide what each person should give, and to enforce this.[7]

Nowadays, the government (and local authorities) fulfils this role to an extent. Welfare payments and discounts on services are given to the needy from our taxes.[8] However, at least in Israel, this is not enough to replenish all the needs of the poor. Thus every community should set up a tzedaka fund, collecting (albeit on a voluntary basis) for the local poor. Those entrusted with this task need to decide how to divide the funds available, assuming that there is not enough to 'replenish the defecit' of each person.

Chazal give us various guidelines here, all based on this pasuk quoted earlier. From the word אביון (destitute) we learn that whoever has a greater need has priority, as we might expect.[9] From the phrase מאחד אחיך (from one of your brothers) we learn that family come first. From באחד שעריך (in one of your territories) we learn that the local community takes precedence.[10] From בארצך (in your land) we learn that the poor of Eretz Yisrael come before the poor of the Diaspora.[11]

Clearly, these guidelines are not enough to dictate exactly what to give to each person. A lot is left up to the judgement of those entrusted with distribution of tzedaka, and care must be taken to ensure that these people are both competent and scrupulous.

Individual Collectors

For the reasons set out above, a person should give the bulk of his tzedaka to the local fund (assuming that there is one and it is run competently). Inevitably though, all of us are approached by individuals collecting tzedaka for themselves. This is the situation described explicitly in the Torah, and refusing to give potentially involves transgressing of a negative commandment as well as neglecting to fulfil a positive one. How much are we obligated to give?

Often we may have doubts over the honesty of collectors we don't know. The gemara actually tells us that we should be grateful to the dishonest collectors, as if all collectors were honest and we didn't give them, we would be in transgression every day![12] The clear implication is that when we don't know if the person is genuine, we have no obligation to give him. However, in many cases we can be confident that the person involved really does need tzedaka.[13]

Even in such cases, the gemara says that we need not give a large amount.[14] There is some debate among the rishonim about exactly what case the gemara is talking about, but in practice there is little difference between the opinions. It is sufficient to give enough to buy something small to eat.[15]

May we merit seeing the fulfilment of the promise:

אֶפֶס כִּי לֹא יִהְיֶה בְּךָ אֶבְיוֹן כִּי בָרֵךְ יְבָרֶכְךָ יְקֹוָק בָּאָרֶץ אֲשֶׁר יְקֹוָק אֱלֹהֶיךָ נֹתֵן לְךָ נַחֲלָה לְרִשְׁתָּהּ. רַק אִם שָׁמוֹעַ תִּשְׁמַע בְּקוֹל יְיָ אֱלֹהֶיךָ לִשְׁמֹר לַעֲשׂוֹת אֶת כָּל הַמִּצְוָה הַזֹּאת אֲשֶׁר אָנֹכִי מְצַוְּךָ הַיּוֹם. כִּי יְיָ אֱלֹהֶיךָ בֵּרַכְךָ כַּאֲשֶׁר דִּבֶּר לָךְ וְהַעֲבַטְתָּ גּוֹיִם רַבִּים וְאַתָּה לֹא תַעֲבֹט וּמָשַׁלְתָּ בְּגוֹיִם רַבִּים וּבְךָ לֹא יִמְשֹׁלוּ.

דברים טו, ד-ו

"However, there will be no destitute among you, as Hashem will bless you in the land that Hashem your G-d is given you as an inheritance. If you will only heed the voice of Hashem your G-d, performing this commandment that I am commanding you today in entirety. Hashem your G-d has blessed you as He spoke to you, you will lend to many nations and not borrow; you will rule over many nations and they will not rule over you."

Devarim 15:4-6

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[1] Hilchos Matnos Aniyim 7:1-4

[2] Kesuvos 67b

[3] Kesuvos 67b, Shulchan Aruch Yoreh Deah 253:10

[4] Hilchos Matnos Aniyim 10:7

[5] This is similar to one who refuses to accept tzedaka despite needing it, except that the usual solution (offering him a loan)  is not viable.

[6] See for example Peah 8:7

[7] For details see Rambam, Matnos Aniyim perek 9.

[8] It may be possible for some people to take into account some of the taxes they pay when evaluating how much tzedaka they should be giving, as they are already giving some without noticing. However, calculating how much we are giving is tricky, and many are receiving (in benefits and subsidised services) more than they are putting in.

[9] For example, if one family need an extra 2,000 shekel per month in order to pay rent, basic bills and buy food, and another family have all of this but need just 100 shekel per month to pay for (basic) activities for the children, the full 2,000 for the first family comes before the 100 for the second. Thus it will seldom be practical to fulfil the technical obligation to replenish a horse and servant for a rich person who became impoverished.

[10] Small, local tzedaka funds should generally be preferred over large, nationwide organisations. One reason for this is that smaller organisations tend to be able to have smaller running costs. For the same reason, it would probably be better if the national government limited their welfare activity, freeing up funds to be used more efficiently by local authorities and small private organisations.

[11] All in the Sifrei, parshas Re'eh section 116.

[12] Kesuvos 68a

[13] As I already wrote, even if he could be doing more to support himself this does not exempt us entirely from the mitzvah.

[14] Bava Basra 9a

[15] The Rambam (Matnos Aniyim 7:7) gives the example of one fig. See Beis Yosef, Yoreh Deah 250 and Shach ibid. 4.

Loan Interest in the Modern World (part 2)

In part 1 I discussed heter iska, and whether it is a genuine solution to the problem of taking interest. Here I will try to clarify whether the provision of loans with interest may be permissible under certain circumstances, without the need for heter iska.

Limited Companies

Different alternatives to heter iska exist, although they are mostly applicable only in localised cases.[1] I am aware of only one that could cover a large percentage of the problems- the use of companies limited by shares. As almost all banks fall into this category, there is the potential here to find far-reaching leniencies.

In a limited company, the liability of members or subscribers of the company is limited to what they have invested in it. In other words, the company is an abstract legal entity of its own which can have assets, and owe or be owed money. The members are not independently obligated by the debts of the company (nor do they have an independent claim to the debts owed to the company). The big question is whether halacha recognises such an entity, or if not, how does halacha relate to a situation where such an entity has been created by secular law.

R' Moshe Feinstein understands that halacha also recognises the concept of a limited company. Therefore he writes that there is no problem to receive interest from a limited company, as no individual has any personal obligation to pay this debt. However, the prohibition of interest does apply when the borrower is an individual, even if the lender is a limited company.[2]

R' Shlomo Zalman Auerbach disagrees. His assumption is that even when the borrower is a limited company, the obligation to pay is equivalent to the owners (shareholders) having an obligation to pay from specific assets. He proves from various cases in the gemara that even when the obligation of the borrower to pay is limited to specific property, taking interest is forbidden.[3]

I believe that the basis of this dispute is the question of how far we take the principle that 'any condition to a monetary agreement is valid.'[4] R' Shlomo Zalman understands that although two parties can stipulate any condition, no-one can create a new type of independent halachic entity (in this case an inanimate, abstract body that has independent financial obligations). R' Moshe Feinstein assumes that this possibility does exist, and in the case of a limited company there is no human who has any obligation to pay the debt from any property whatsoever.[5]

Futures Trading

To decide how to rule in this dispute, it helps to find precedents based on similar principles. One such example is the issue of the purchase of something that does not yet exist (e.g. produce that has not yet grown). In the gemara there are two opinions about whether such a purchase is valid, but the halacha clearly follows the view that it is not valid.[6]

The question is whether this rule is set in stone and unchangeable. We know that although the gemara has rules for how transactions can be carried out, when the custom is to use alternative acts of acquisition, this is recognised by halacha.[7] What happens when the custom is to acquire things that do not yet exist?

This question was already raised by early authorities. The Mordechai quotes Rabbeinu Yechiel (13^th century, Paris/Eretz Yisrael) who says that there is no way that something that does not yet exist can be acquired.[8] However, the Rosh (1250-1327, Germany/Spain) writes straightforwardly that when the clear custom is to buy things that do not yet exist, it works.[9]

The Chasam Sofer (1762-1839, Germany/Hungary) writes that really all agree that the custom is binding here. The transaction that Rabbeinu Yechiel ruled was invalid was not done in accordance with the custom at the time. He explains that the only reason that the gemara said that one cannot acquire something that does not exist is because of a lack of full understanding on behalf of the parties involved. When the custom is to carry out such transactions, the required understanding does exist and thus the acquisition is valid.[10]

Although not all agree with the Chasam Sofer,[11] the existence of advance purchase of things that do not yet exist has long since been recognised as valid by all batei din. In a world where such transactions happen every minute of the day, it simply would not make sense to fight this reality. The entire concept of ownership and transactions preceded the Torah and was based on custom, and it would not be logical to think that the Torah wanted to stop this.

I believe that the same is true when it comes to limited companies. When the whole concept of a limited company was new and had little effect on everyday life, it may have been relevant to debate whether halacha recognises such an entity. Nowadays, when every individual has dealings with such companies, it is not relevant. The clear understanding when opening accounts with banks, the electricity company etc. is that they will be dealt with in the way that civil law defines them, and there is no reason for halacha to treat them differently.

Can a limited company be Jewish?

R' Moshe Feinstein's leniency only helps us with a small part of the problem. While savers can relax if they know it is ok to take interest from banks, borrowing from banks is a problem on a much larger scale. However, if we are consistent with our acceptance of the legal definition of a limited company, we can question why it should be a problem to pay interest to a limited company.

The prohibition of borrowing with interest only applies if the lender is Jewish.[12] According to what we have seen so far, a limited company is not even human. How then can paying interest to it be prohibited?[13]

To answer this, it helps to consider the relative ease in starting a limited company. Two Jewish partners could make their company limited, becoming the only shareholders and appointing a director. If this company lends money, it would be hard to argue that the interest is merely being paid to an independent, inhuman entity. The two partners have full control, and the director runs the company is merely their agent. If he acts against their wishes, he could be fired at any time.[14] Clearly then, taking interest under such circumstances is forbidden.

The same should be true with a thousand or a million equal shareholders, as being in a partnership does not exempt us from the prohibitions of the Torah. Theoretically, it could be forbidden for a Jew to own shares in a company that lends to Jews with interest (or a company that owns chametz on Pesach, as well as other examples).

Elsewhere, R' Moshe Feinstein explains why in reality this is not the case. As the main owners of the company usually keep enough shares for themselves to ensure that they maintain control, the vote that a regular shareholder gets is merely a fictitious pretence. Thus the regular shareholders do not really own part of the company, and all they have bought is the right to a share in the profits. Buying enough shares to get a significant say is indeed forbidden.[15]

It is clear to me that this is also the reason that R' Moshe does not allow borrowing from a 'Jewish' limited company with interest. If the majority shareholder or some of the significant shareholders are Jewish, he or they own part of the loan. Only the portion of the company 'owned' by the insignificant shareholders can be described as a loan from an inhuman entity.

Thus a person looking for a mortgage who does not want to rely on heter iska needs to find a bank whose significant shareholders are not Jewish. This is no easy task in Israel,[16] so we need to be a bit more creative. A bank with no major shareholders would not help, as then even the shares of the regular shareholders would be meaningful.[17]

Communal bodies

The only real solution I can think of is the use of a limited company whose major shareholders themselves are abstract, inhuman entities. The classic example is the government, whose funds should not be extractable by any individuals under any circumstances. One who borrows from the government is genuinely not borrowing from a Jew, irrespective of how religious the ministers may or may not be.

To the best of my knowledge, nowadays none of the Israeli banks are government owned. This is unlikely to change in the near future (nor would I want it to), but we don't need the government to help us here. All we need is to create a similar model, a body that has no real owners who can dissolve the company and take the funds for themselves. Any institution like a shul or community centre, or a network of such institutions, could be used.

It may sound unrealistic, but I believe that if there was enough will for it from serious religious Jews, it could be done. If such a plan was implemented and banks relying on heter iska lost some of their income, it may also encourage a more serious application of the 'iska' rules (see part 1).

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[1] For example, if the main intention is for a payment to be made on time with no interest, penalties for late payment may be justifiable halachically.

[2] Igros Moshe, Yoreh Deah 2, siman 62

[3] Minchas Shlomo, part 1, siman 28. The proofs seem watertight, but are only relevant according to his understanding of how to view limited companies.

[4] See Kiddushin 19b

[5] Although the person employed by the company responsible for this area must carry out his responsibility, this is not a personal debt. If he resigns from his job before the payment date, this responsibility will pass to someone else. There is not even any person who is ultimately responsible, as the shareholders can also sell their shares to others.

[6] See for example Yevamos 93a, and Shulchan Aruch Choshen Mishpat 209:4.

[7] This principle is known as situmta, based on the custom mentioned in the gemara in Bava Metsia 74a.

[8] Hagahos Mordechai, Shabbos section 473.

[9] Responsa of the Rosh 13:20.

[10] Responsa of the Chasam Sofer 5:65.

[11] See Pischei Teshuva, Choshen Mishpat 201:2.

[12] Mishna Bava Metsia 70b. Lending to a non-Jew with interest is forbidden rabbinically, although here many leniencies exist which are beyond the scope of this post.

[13] In fact some write that it is permitted. See R' Osher Weiss's article in T'chumin, volume 33.

[14] They also can dissolve the company at any time, taking the interest for themselves. In contrast, if the company borrows money, the lender cannot demand payment from the partners. The responsibility to pay (from the funds of the company) is the director's, and even if the director resigns all the shareholders have to do is to appoint a new director.

[15] Igros Moshe, Even Haezer 1:7

[16] Information about ownership of banks in Israel is available here (in Hebrew).

[17] If such a bank existed even outside Israel it would be problematic to borrow from it, as even one Jewish shareholder would be considered a genuine part-owner.