Caring for the Poor (15) - More on Poor Loans

Loans give an incentive for the person to get back onto their feet. Most people do not want to be in debt. They will usually work hard to pay back the loan.

The worst effect of government social welfare is the effect that it has on the incentive to work and succeed. People no longer have to work to supply their needs, because the government will provide for them. Those who do work are taxed heavily, to pay the cost of social welfare. They soon get the feeling that it does not pay to work hard and the whole economy is weakened. Poor loans strengthen the economy.

Poor loans are an excellent method for helping people in third world countries. The greatest problem is lack of capital. Local lenders often charge exorbitant interest rates that enslave people for life. Providing people with an interest free loan to start a business if often the best way to help them. They will often be able to repay the loan quite quickly. An effective business will provide financial support for the entire life time. Those who are successful will be able to help families. Interest free loans are often the best way to help the poor.

Caring for the Poor (14) - Poor Loans

The second main method for assisting the poor is an interest-free loan. When a person strikes temporary hardship, they will often need help to get started again. They may need to pay for training or need capital to start a business. The solution is a loan of some money. God’s people are commanded to be generous to those in need.

If there is a poor man among your brothers in any of the towns of the land that the LORD your God is giving you, do not be hardhearted or tight fisted toward your poor brother. Rather be open handed and freely lend him whatever he needs. Give generously to him and do so without a grudging heart; then because of this the LORD your God will bless you in all your work and in everything you put your hand to. toward your brothers and toward the poor and needy in your land. (Deut 15:7,8,10).

The context of this passage is interest on poor loans. There are several important principles that apply.

1. No interest should be charged on a loan to the person who is poor.
   

   Do not charge your brother interest, whether on money or food or anything else that may earn interest. 20 You may charge a foreigner interest, but not a brother Israelite, so that the LORD your God may bless you in everything you put your hand to in the land you are entering to possess. (Deut 23:19-20).

   The loaner gives up the interest that they could earn if they put the money in bank. They are effectively giving their interest away.
   
   
2. The loan should have a seven-year term (Deut 15:9). We do not know the future, so we should not commit ourselves for longer than seven years.
   
   
3. If the loan has not been repaid at the end of seven years, it should be cancelled (Deut 15:1). This removes part of the burden from the recipient. They have an incentive to succeed, but if they fail the burden will be lifted. This principle also means that the person making the loan must be prepared to lose the entire amount. They face uncertainty. They might just lose the interest, but there is a possibility that they will lose the lot.
   
   
4. Often the loan will be provided by a family member (Lev 25:25). If no one in the family can help, someone in the church should provide the loan.
   
   
5. If the poor person has no family to help and their character is not known to the church, they might be asked to give something of value as a pledge. If the pledge is something that they need during the day, it should be returned in the morning.
   

   If the man is poor, do not go to sleep with his pledge in your possession. Return his cloak to him by sunset so that he may sleep in it. Then he will thank you, and it will be regarded as a righteous act in the sight of the LORD your God (Deut 24:10-13).
   

6. We must always showing kind and respect to the person in need. The fact that they are poor does not give us the right to charge into their house or tell them what to do.
   

   When you make a loan of any kind to your neighbor, do not go into his house to get what he is offering as a pledge. Stay outside and let the man to whom you are making the loan bring the pledge out to you (Deut 24:10-13).
   

The problem with charity is that it makes the recipient feel dependent and worthless. Providing a loan says to the person that you are confident in their future. You are saying that you have faith in them. This helps build the person’s self esteem and self-respect.