Disadvantages Of Riba

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In addition, when the lenders or financial institutions practices riba-based system, it will give a great blow to the poor or the needy due to the compounding effect of the interest. Lending riba-based loans will exploit the poor as it will result in more poverty and reducing their future earnings. This is because the longer the borrowers cannot pay the loan; the higher amount of loan will be due to its interest. On the other hand, riba-based loans make the rich lenders richer because they gain the benefit by advancing their extra money based on interest from the needy, and this will increase their future earnings. This situation shows the rich become richer and the poor become poorer. In the other meaning, riba will create wide gap between the rich and the poor, where finally the situation will divide these peoples into classes which can occur inequality and give negative picture on the social aspect of a country. Besides that, riba can be a cause or encouragement either to the borrowers or the lenders to behave negatively. It is because when the borrowers make riba-based …show more content…

When the surplus units save their money at financial institutions in the shape of interest, they will be rewarded. The higher amount of savings; the higher interest rate will be getting. Because the needy have low income, they making loans and were forced to pay extra. This makes them or the borrowers less opportunity for saving more and getting interest income from the savings to make wealth. So their wealth will never sprout and will continue to be pressed and depressed because of the debt. Meanwhile for the poor countries, foreign loans play a crucial role in their economic development. However, a loan with the high rate of interest taken by the poor countries will make them difficult to repay the installments of the debt. It is not help the poor countries at all, but increase the burden and make them fall

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