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:
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?!
Interpreting Scripture Correctly
What were the reasons for the condemnation?
They thought it was condemned by Scripture.
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.
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
Much of the text in our course Interpreting Scripture Correctly is based on publications by John Wijngaards, in particular:
Illustrations in the video clip by Jackie Clackson.