Starting in January 2017, the State of Israel will open a savings account for every child eligible for a child allowance and deposit 50 Israeli shekels ($13) in it every month until the child is 18. These funds will be disbursed in addition to the child allowance received by his or her parents. Under the plan, Saving for Every Child, the funds in the name of the child will be put in a retirement account or a bank account, according to the parents’ wishes. In addition to investment plans at banks and retirement funds, ranked by degree of risk, parents can also select from two other options: a savings plan that conforms to Halakhah (Jewish law) and a plan that conforms to Sharia (Islamic law).
Jewish and Islamic law have something in common when it comes to borrowing and lending with interest. “Lending with interest is one of the gravest transgressions in the Torah, and therefore, one of the greatest mitzvoth [good deeds] is lending without interest,” Rabbi Abraham Fine, from the Court for Interest in Jerusalem, explained to Al-Monitor. Similarly, Ibrahim Salma, imam of the Ajami Mosque in Jaffa, told Al-Monitor, “In Sharia, interest is a grave sin, and a Muslim must not pay or receive interest, even a pittance.”
The Jewish and Islamic savings plans for children are supposed to guarantee that no interest is earned. Practically, Sharia favors investing in retirement plans, and Halakhah makes it possible to put money in banks as well as retirement plans. The big problem with having money in banks is that every deposit is essentially a loan to the institution, which then pays interest to the depositor. Even if a depositor requests not to receive interest on his or her money, the bank uses the depositor’s funds to loan with interest to others, which would be in violation of religious law.
Judaism found the solution to interest-bearing bank accounts in exemption contract, agreements that legally change the status of a loan. Through this mechanism, when someone deposits money in a bank, he actually becomes a partner in the bank’s investments, for which he receives agreed-upon profits rather than compound interest. This situation is also in force when the transaction is reversed, when the bank is the lending party.
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