EFFECTS OF RIBA ON LOANS IN A SOCIETY

A CASE OF ZANZIBAR URBAN WEST REGION

Abstract

This study attempted to examine the effects of Riba on loans in Zanzibar society case of residents of Urban West Region.  It is surprising to note that although these loans charge a high interest rate the demand has been increasing by the day. The study had three specific objectives; first to examine causes of residents of Urban West Region to take loan with Riba, second to identify positive and negative effects of Riba on loans in residents of Urban West Region, and third to identify the recommendation measures to be taken in order to overcome interest on loans in the residents of Urban West Region.

Theory of maqaswid by Ibnu Ashur was used. Interviews and focus group discussions were conducted during the study, the sample used was made up of adolescents and adults who are the main borrowers.

The study found that interest on loan has numerous effects in Zanzibar society among them are increased poverty, bankruptcy, division of family, increasing number of street children, diseases, to name but a few.

Certain measures have been suggested in order to overcome the effects of interest on loans. Among them are to improve the wages of wage earners, to reduce tariff for imports of basic commodities, establish community shops, the labour force to increase productivity that will eventually lead to higher Gross National Product and also to reduce luxurious life styles that eventually force them to borrow interest-based loans.