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Are we allowed to take interest on loans?

 

The Magisterium forbade the taking of interest for capital loans until 1830. Here are some examples of official Church teaching on the matter:

  • The Fathers condemned it: Athanasius (Expos in Ps. xiv), Basil the Great (Hom in Ps. xiv), Gregory Nazianze (Orat xiv, in Patrem tacentum), Epiphanius (adv. Haeres, epilog, c. 24), John Chrysostom (Hom 41 in Genes), Theodoret (Interpr. in Ps. xiv.5 and liv.11), Hilary of Poitiers (in Ps. xiv), Ambrose (de Tobia liber unus), Jerome (in Ezech vi.18), Augustine (de Baptismo contra Donatistasiv.19), Leo the Great (Epist. iii.4), Cassiodorus (in Ps.xiv 10).

  • Early local Church Councils forbade the clergy to take interest: Nicea I (325 AD), Carthage (348 AD), Loadicea (343-381 AD), etc.

  • Later Church Councils imposed the same prohibition also on the laity: Theodore's Penitential (690 AD), Mainz (813 AD), Rheims (813 AD), Chalons (813 AD), Aix (816 AD).

  • Peter Lombard, Aquinas, Bonaventure and other medieval theologians all condemned any taking of interest. Thomas Aquinas did so on the grounds that it was an “unnatural” form of reproduction.

  • The Second Council of the Lateran (1139 A. D.) prescribed that persons who take interest “be not admitted to the sacraments”. And: “in case they do not retract their error, they should be refused an ecclesiastical burial.”

  • Many Popes condemned the practice. An outspoken condemnation was made by Benedict XIV in Vix Pervenit of 1745. He stated: “One cannot condone the sin of usury by arguing that the gain is not great or excessive, but rather moderate or small; neither can it be condoned by arguing that the borrower is rich; nor even by arguing that the money borrowed is not left idle, but is spent usefully, either to increase one’s fortune, to purchase new estates, or to engage in business transactions. The law governing loans consists necessarily in the equality of what is given and returned; once the equality has been established, whoever demands more than that violates the terms of the loan.”

 

When banking started in Europe, businesses began to demand interest on money loans - as we all do today.

 

The Church stuck to its condemnation for centuries. The magisterium revoked the prohibition only in 1830. During the preceding six centuries many businessmen and their families lived and died outside the Church.

 

What went wrong?!

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Interpreting Scripture Correctly

 

 

First Observation

 

What were the reasons for the condemnation?

They thought it was condemned by Scripture.

  • "If you lend money to any of my people, to any poor man among you, you must not play the userer with him: you must not demand interest from him." Exodus 22,25
  • "If your brother (= fellow Insraelite) who lives with you falls on evil days and is unable to support himself with you, you must support him as you would a stranger or a guest, and he must continue to live with you. Do not make him work for you, do not take interest from him: fear your God and let your brother live with you. You are not to lend him money at interest, or give him food to make a profit out of it." Leviticus 25,35-37
  • "You must not lend on interest to your brother (= fellow Israelite), whether the loan be of money or food or anything else that may earn interest. You may demand interest on a loan from a foreigner, but you must not demand interest from your brother; so that Yahweh your God may bless you in all your giving in the land you are to enter and make your own." Deuteronomy 23,19-20.

Second observation

 

The Scripture passages actually speak of usury, that is: exploiting someone's poverty by demanding a huge interest when the person is in absolute need.

In Old Testament times this would be, for instance, demanding two loaves back for a loaf of bread lent to a poor family. This type of usury is still found in rural communities all over the world. In towns it is practised by loan sharks who demand 40% or more interest on loans given to people in need. This usury is the kind of 'taking of interest' condemned by the Old Testament.

The Fathers of the Church, pastoral leaders, theologians and the Popes simply equated the ‘taking of interest on capital loans’ with ‘usury’, which had been condemned in Scripture.

However in modern times, capital has started playing another role. Capital allows enterpreneurs to open a shop, buy land, develop an industrial product, etc. And banks provide such capital. Capital is productive. If well spent, it grows and yields a harvest like a crop in the field. And this changes everything.

In Old Testament times ‘usury’ consisted in demanding a profit on the loan of a loaf of bread or a sack of wheat. Such a practice is an exploitation of the poor and demands condemnation. But Scripture did allow landowners to demand a regular income from tenants who cultivated the land. Read, for instance, Matthew 21,33-41. A loaf of bread is not fertile. A piece of land is fertile. From the loan of land one may demand a share of the profit.

The Church changed her mind on the taking of interest when it realised that the modern system of banking, which began in the Middle Ages, treated money in this new way. In our modern society capital is ‘fertile’. It produces a profit as much as a piece of land does. Taking interest for a capital loan is consequently in harmony with Christian justice.

Further explanations and bibliography in John Noonan, “The Amendment of Papal Teaching by Theologians”, in Charles E. Curran, ed., Contraception: Authority and Dissent, (New York: Herder & Herder, 1969), pages 41-75.

Conclusion

For centuries the Church excluded people from the sacraments for a practice which was absolutely legitimate - and all this because of a faulty interpretation of Scripture and a mistaken clinging to 'traditional doctrine' . . .

    © John Wijngaards

Credits

Much of the text in our course Interpreting Scripture Correctly is based on publications by John Wijngaards, in particular:

  • Background to the Gospels (New Delhi 1970),
  • God's Word to Israel (Ranchi 1971),
  • Handbook to the Gospels (Ann Arbor 1980),
  • Historicity in the Old Testament (Bangalore 1983)
  • and Together in My Name (London 1991).

Illustrations in the video clip by Jackie Clackson.

 

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Correct Interpretation. Principle 1 Correct Interpretation. Principle 2 Correct Interpretation. Principle 3 Correct Interpretation. Principle 4 Correct Interpretation. Principle 5
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Correct Interpretation. Principle 7   Correct Interpretation. Principle 8   Correct Interpretation. Principle 9   Correct Interpretation. Principle 10
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