Impact of Riba Based transactions on the Socio-Economic system of Pakistan

Abstract

Riba-based transactions can have detrimental socioeconomic effects on Pakistani society. The aggravation of wealth disparity is one of the main effects. When Riba is used in financial transactions, it frequently creates a situation where the rich class uses Riba to increase their wealth while the less fortunate struggle to break free from a debt cycle. This leads to social discontent and economic inequality by growing the gap between the affluent and the poor. Riba can also impede economic growth by deterring investment in profitable industries. Rather of allocating capital to entrepreneurial endeavors that foster economic expansion, the focus on Riba-based gains promotes speculative and unprofitable financial activity. This might hinder the nation's overall economic growth, which would have an impact on people's quality of life and keep the most vulnerable members of society trapped in a cycle of poverty. Moreover Riba-based transactions, can have several negative impacts on the society of Pakistan. One of the primary consequences is the exacerbation of economic inequality. Riba often leads to the concentration of wealth in the hands of a few, widening the gap between the rich and the poor. This unequal distribution of resources can result in social unrest, as disenfranchised segments of the population struggle to meet their basic needs. Additionally, Riba-based transactions can hinder economic growth by discouraging investment and entrepreneurship. Many potential entrepreneurs, particularly those with limited resources, may find it challenging to access financing under Riba-based systems. This can stifle innovation and impede the development of small and medium-sized enterprises, hindering the overall progress of the society. Moreover, the reliance on Riba may contribute to a financial system that prioritizes short-term gains over long-term sustainability, potentially leading to economic instability and crises.