Abstract:
Usury is a practice of lending money with exorbitant or abusive rates of interest which illegally
enrich the usurers. Usury is now a day’s become a serious problem in economic activities across
the globe and it is one of the contributing factors for fluctuations of economy and obstacle in
economic development; especially in the third world countries. Usury is abstract mechanisms
which dry out the interaction between supply and demand and affect the socio-economic life of
the society. This study is aimed to assess the socio-economic impact of Usury in Ethiopia by
taking Aira Woreda as a case which found in Oromia region West Wellega Zone; With the
specific objectives of investigating mechanisms of practicing usury, identifying major causes of
usury, examining the socio-economic effect of usury and identifying the major challenges that
faces the eradication or elimination of usury. The investigator used exploratory case study type
of research design and mixed method is employed as the research strategy. The data were
collected from both primary and secondary sources. The primary data for this study was
collected from 207 respondents which were selected by applying systematic sampling techniques
using survey questionnaires and in depth interview was conducted with 8 individuals who were
affected with usury by identifying them through snow-ball technique. The study applied both
qualitative and quantitative methods of data analysis to interpret the result of the study. The
study’s finding shows that; usury is accepted as a normal practice and loan is easily obtained
through usury than formal loan. Traders, farmers, government and NGO workers are engaged in
usury activity in study area. Furthermore the study shows lack of access of formal loan and
inability to fulfill requirements of MFI are major causes of usury. In addition this study indicated
that brokers are the most mediators between borrowers and usurers and this usury has negative
impact on social and economic life of the community and result in expropriation of assets of poor
by usurer. Based on the findings of the study, the impacts of usury on socio-economy of the
community are identified. As recommendation different government institution and NGO should
focus on creating the awareness of the society on the effect of usury. In addition justice sectors
should entertain loan contract in line with anti-usury measure. In general this study shows that
the impact of usury significantly affects the socio-economy of the society.
