Ribbis on Borrowing Different Currencies

"Hi Rabbi, It's like this: I am planning to borrow money from a friend. I live in Israel, and the currency that I plan to borrow is dollars. Would it be okay to borrow, let's say, $200,000 to return it in two years, even though the exchange rate may fluctuate and the dollar might be worth more compared to the shekel? For example, now it is worth around 752,000 shekels, and in two years when I plan to return the money, it may be worth over 800,000 shekels. So there is an issue with ribis (interest) here. Is there anything I need to write in the contract so it will not be considered as ribis?

The answer:

Before you borrow the money, you should have in your possession at least a dollar note. Then it would be permissible to borrow the money without having a problem with ribis.

The answer explained:

Prohibition of Ribbis:

It is written many times in the Torah that one may not lend out money with interest. Not only is it prohibited for the lender to do so, but it is also prohibited for the borrower to pay interest.

The typical case of interest that the Torah prohibits is when the lender makes a condition with the borrower that he will lend him a certain amount of money and will receive a percentage on top of the original sum lent.

In a case where there was no condition to return an extra amount, but the borrower decides to add money, this is prohibited by rabbinic law. According to the Torah, the prohibition applies only when the loan was made with the condition to pay interest.

Se’ah be’sah

The rabbis prohibited a case similar to yours, which is if someone borrows a kilo of wheat with the condition that he return that amount in, let's say, half a year. This might not seem to be interest since the borrower is returning the same amount of wheat. However, since there is a chance that the price of wheat will fluctuate, there is a rabbinical prohibition of interest. For example, if at the time he borrowed the wheat it was worth 100 dollars and when he returns the wheat half a year later it is worth 150 dollars, he is returning more value.

To be clear, the Talmud distinguishes between lending money and lending merchandise, and the above halacha applies only when borrowing merchandise, like wheat for wheat. However, if one is lending money with the agreement to receive the exact amount back at a later date, there is no prohibition, even if the currency fluctuates over time

The reason for this is, that we say food and merchandise fluctuate in price, but the currency being used remains constant. For example, oranges might cost 5 dollars a kilo at times and 6 dollars a kilo at other times, so we say that it's the oranges that fluctuate, not the dollar. The dollar stays the same.

So to summarize, the rabbinical prohibition of se'ah be'sah applies only to merchandise, not money.

Dollar/shekel

However, in your case, since you are living in Israel and borrowing dollars, only the shekel can be considered money with regard to interest (ribis), as it is the currency in use. Therefore, if you were to borrow shekels and return the same amount, it would be permitted. However, since you plan to borrow dollars and return dollars, and since dollars are not a currency used in Israel, this cannot be considered borrowing money to return money. Rather, we view dollars as merchandise. Since it could fluctuate with respect to the shekel, there would be a rabbinical prohibition of se'ah be'sah.

Dollar/ shekel – solution :

The Talmud states that in a case where someone already possesses a certain type of merchandise—let's say wheat—and then borrows more wheat from a friend, there is no prohibition of se'ah be'sah if he returns that amount at a later date. This is because he could have returned the wheat immediately using what he had in his possession when he borrowed it. Thus, we consider any fluctuation in the price of wheat as if it occurred while the wheat was in the borrower's possession, and he is simply returning the wheat back to the owner.

The Shulchan Aruch adds a leniency to this rule, that even if one does not have the full amount of wheat he plans to borrow in his possession, having only part of that amount is sufficient. This amount that he currently has is enough to allow him to borrow more wheat than he currently has without violating the Rabbinical prohibition of se'ah be'sah.

The reason is that for each dollar he borrows, we can say there is a dollar he has at home to counter that borrowed dollar.

Wishing you well.

Talmud Bavli Bavah Metsiah Page 75a

Shulchan Aruch YD Siman 164.