ribis and foreign currency conversion

Question

I am afraid that I have only recently started to study this kind of thing and I completely unlearned compared to most of the contributors here, so I apologize if my question is somewhat unsophisticated.

Consider a Jewish person who grew up in the UK, but lives in the US. Suppose that an old friend of his (who is Jewish), living in the UK, asks him for a loan. If everyone still lived in the UK it would be easy: the loan would be for a fixed number of British pounds, with no interest. And if everyone lived in the US, it would be easy: a fixed number of US dollars, with no interest. But here the lender and borrower live in different countries, with different currencies. If the loan is made in dollars, and the dollar appreciates, then the borrower will end up paying more back (in pounds, the currency they use every day) than they borrowed, which looks like ribis. But if the loan is made in pounds, and the dollar depreciates, then the lender will end up receiving back more in dollars (the currency they use every day) than they lent, which also looks like ribis.

Is there some simple rule like 'work in the lender's currency'? Or something more complicated? Or is such a transaction such as this simply impossible? (The latter would be sad, given the positive commandment to lend money to those in need of it.)

I know that the relevant standard is meant to be monetary value, but I don't see how to apply that here since there are two relevant notions of money.

UPDATE A quick point of clarification: it's hard to give a good clear answer to the question 'in which country would the loan be made'. The lender lives in the US, and would probably just instruct his bank in the US to do a bank transfer to the UK. The borrower lives in the UK, and would just receive the bank transfer. Returning the money would work in a similar way. So each person would always just be staying in their own country.

Answer 1

http://www.ou.org/ou/print_this/64160

The issue is that foreign currency is not called "currency" in another country because it is not commonly used there.

There are two opinions of what is the law if a loan took place in one country, and expecting to be payed back in another country. According to the Nsivos Sholom (162:1), one could pay in either original currency borrowed. or in the local currency with the current exchange rate. R' Yaakov Blau says that because the stipulation in the loan was to pay back in foreign currency, it is like a loan of "foreign currency" and is forbidden (unless the borrower possesses one unit of the foreign currency).

One simple solution is to give the borrower one pound, and then you could lend to him in pounds.

Answer 2

Theoretically, one should be able to pay back a loan in some "equivalent" manner.

The problem is, currency values fluctuate all the time.

R' Blau is addressing a different problem: By the borrower possessing at least one unit of the other currency, it is no longer "foreign" to him - and then the loan can be made in that currency.

That doesn't solve the problem of forbidden interest.

Generally speaking, we want to minimize burden on the lender, so that lenders will continue to lend.

In the specific case above: The lender should wire (let's say $1,000) US dollars to the borrower's bank account in the UK.

This will automatically be converted to, let's say, 667 Pounds Sterling. (assuming 1.5 dollars to the pound)

When the borrower goes to repay, he should wire $1,000 US dollars back to the lender's account in the US.

IT DOESN'T MATTER HOW MANY POUNDS THIS COSTS THE BORROWER TO ACCOMPLISH.

It might be less, or more, than the 667 pounds he received. That's irrelevant. As long as the lender receives the exact amount of the same currency he lent out, there is no interest.

Because the potential for ribis is so great when borrowing in one currency and repaying in another, I am always very careful to follow the procedure above. The key is, the lender ends up with the same amount of the same currency that he lent, at the end of it all.