The Keter Institute and the Lev Academic Center's annual 'Economics and Halakha' conference took place on Wednesday in Jerusalem and featured Supreme Court Justice Neal Hendel, Chief Rabbi of Israel David Lau, Deputy Minister of Finance MK Yitzhak Cohen, and Keter Institute head Rabbi Shlomo Ishon.
Rabbi Yosef Tzvi Rimon, who heads the Lev Academic Center Jewish studies program, criticized the abundance of interest-free loan funds (gemachs) in the haredi world, likening them to a Ponzi scheme. "The abundance of [interest]-free loan funds is not a good thing. After all, sometimes people borrow money from one fund and then have to take a loan from another in order to return the money to the first," said Rimon.
"Then they borrow from a third fund to return the money to the first two," Rimon continued. "If the family has no money, they are not permitted to take a loan from such a fund in order to finance a wedding. It's a problem. We need to keep these funds relatively small, and we can't enable people to spend more money than they have. "
Yossi Schimmel, who heads the "Ahavat Torah" charity fund, disagreed, telling the conference that he favors expanding the 'free' loan funds. According to Schimmel, these funds manage money better than banks and criticized the regulations that the funds are subject to.
"A person who has never done a kind and generous act [of this type] does not understand at all how a free loan is managed cannot criticize these funds," argued Schimmel. "We had a case where a Jew arranged an organ donation for someone and he gave money to the fund [to finance it], and in return the police are now investigating the organ donation society for allegations [that it favored the person whose transplant was funded]. It's that serious."
Attorney Yoel Briss, former legal advisor to the Finance Ministry and head of the Beris team for regulating nonbank financial activity, said that the most important thing is to protect the public: "People lend money to the loan fund and do not always know the difference between a donation and a loan. Theoretically, we can have a case where a person who gives money to such a fund may not be aware that he won't get it back."