Tuesday, January 26, 2010

Only in Israel: Heter Iska from Israel's Electric Company

A friend of mine recently wanted to invest in the Israel Electric Company by purchasing IEC issued corporate bonds. Yet, as an observant Jew, he was concerned about transgressing the Torah laws of charging interest -- and wanted to know if the IEC indeed had a "heter iska" to allow for earning interest from the IEC issued bonds.

"A Jew is prohibited from charging interest (ribit) to another Jew.
1. The Heter Iska was developed by the Rabbis in order to structure business transactions in such a manner as to avoid running afoul of the prohibitions against ribit (interest).

2. The Heter Iska principle is based upon the borrower and lender agreeing to be partners in a business venture, whereby one partner invests money and the other uses his entrepreneurial skills to manage the venture. The investor-partner can thereby earn "profit" attributable to his portion of the joint business venture, and the sharing of such profit by the manager-partner would not constitute payment of interest upon a loan. The arrangement thus has characteristics of both a loan and a trust. more here @ JLaw "
So...he wrote a simple email to the IEC with his question:
"Hello, I wanted to check if Chevrat Chashmal has a 'heter iska', to allow getting interest from the company’s agachim.

If so, could you please scan it & send me a copy?"

The IEC quickly replied with an email that of course they had a heter iska, and they sent the following attachment:

I'm impressed.

Yet another great reason to live here...

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yoni r. said...

I've always wondered why a business needs a "heter iska". They already are an "iska". What does the heter add?

FrogMan said...

You must have grown up watching sesame street and be a fan of Kermit the frog to have chosen to transliterate Rēˈbēt (reebeet) as ribit.

I can see you in the bank walking around saying "ribit, ribit, ribit!"

You crack me up!

Anonymous said...

Yoni R. -- see the article I hyperlinked in. It explains everything about Heter iska.

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