It isn't 'free loans to Jews'. If all goes well, the bank gets the amount of benefit, they just cannot call it 'interest'. They do that because of some kind of religious rule.
LendCo advances a loan of £100,000 to Mr A Borrows for a 12 month term with interest of 5% per annum. 50% of the loan, or £50,000, is treated as a repayable interest-free loan, and 50%, or £50,000, is an investment into Mr Borrows’s real estate business. Mr Borrows would be required to pay profits from the investments to LendCo at a rate of 10% of the investment portion per annum. This results in Mr Borrows paying £5,000 to the lender per annum, as investment profits, equivalent to paying 5% interest on the loan.
It isn't 'free loans to Jews'. If all goes well, the bank gets the amount of benefit, they just cannot call it 'interest'. They do that because of some kind of religious rule.
LendCo advances a loan of £100,000 to Mr A Borrows for a 12 month term with interest of 5% per annum. 50% of the loan, or £50,000, is treated as a repayable interest-free loan, and 50%, or £50,000, is an investment into Mr Borrows’s real estate business. Mr Borrows would be required to pay profits from the investments to LendCo at a rate of 10% of the investment portion per annum. This results in Mr Borrows paying £5,000 to the lender per annum, as investment profits, equivalent to paying 5% interest on the loan.