Ibrahim sits in a dark corner of a cafe, talking about his gang, the stabbings and the money he makes from selling heroin. Outside, locals splash through the narrow lanes of the congested capital of the Maldives under a heavy monsoon shower. "It's been a good few months. We've been doing well," he says, lighting another cigarette. Recently Ibrahim's gang has been busy with a new sideline: providing political parties with muscle to intimidate opponents, swell meetings and provide security. "There's so much demand, we've had to appoint someone just to run that side of our operations. Requests are coming in all the time," he says.

Less than a mile from Ibrahim's neighbourhood is the international airport, where 900,000 tourists arrived last year heading for resorts on uninhabited coral atolls spread across the island nation. Few of them venture into Male. Even fewer know or care about the seething political instability, violence and social problems that wrack the country. Ibrahim, the gangleader, said he had agreed to talk to the Guardian because he wanted "people around the world to know how things are here". "This is a paradise, but not everyone is an angel. Things have gone this far because of politics," he says. He is not the only one to think so.

In 2008, presidential elections ended the three-decade dictatorship of Mamoun Abdul Gayoom and brought Mohamed Nasheed, a veteran human rights campaigner and well known environmental activist, to power. His victory, a new constitution and a wave of international goodwill appeared to usher in a new era. But Nasheed had many enemies: the former regime, new players hungry for power in the young democracy, religious conservatives. Then there were those alienated by what one local commentator called his "all or nothing" style.

The result was a series of escalating political clashes over issues such as the independence of the judiciary and alleged "anti-Islamic" policies in the Sunni Muslim nation. After weeks of street violence, in February Nasheed was forced to resign. In two weeks, he faces trial on charges of illegally detaining a senior judge. Conviction could see him barred from participation in a new presidential poll scheduled for next year.

"They will fix it one way or another," the former president, 45, told the Guardian in Male last week. Government officials and supporters say the law is simply following its course. The political instability has led to a climate of fear. "When you go out, you don't know if you are coming home unharmed," said a fish exporter in Male. He did not want to be named. There have been a series of attacks on prominent activists and politicians. In July, an outspoken secularist blogger survived having his throat cut. Two weeks ago, a moderate cleric and member of parliament was fatally stabbed.

"I get regular threats by text or calls. Some say they will kill me, some threaten me with paralysis," said Eva Abdullah, a parliamentarian from Nasheed's Maldivian Democratic party (MDP). Senior officials of Adhalat, the Maldives' main religious conservative party, said they too received death threats. All know there are few hiding places on a tiny claustrophobic island with 110,000 inhabitants, hundreds of miles from the nearest major land mass. Activists from the MDP also complain of police harassment and say senior officers responsible for abuses during demonstrations in February are being protected.

An MDP "protest camp" has been repeatedly raided. One activist was charged with practising black magic. Others, themselves victims of violence, are facing charges of resisting arrest. Amnesty International recently highlighted a "human rights crisis" in the country. The physical violence has a verbal equivalent. Political debate often descends into unrestrained personal attacks. A pamphlet published by opposition politicians claimed that "since assuming office Nasheed has been working ceaselessly to weaken the Islamic faith of Maldivians, allow space for other religions, and make irreligious and sinful behaviour common". One of the authors, Hassan Saeed, is now chief adviser to the current president, Mohammed Waheed Hassan Manik. In an interview with the Guardian, he said the charges were justified. "You look at his behaviour, his actions, you have to come to that conclusion," Saeed said.

The result of such political instability is an atmosphere where gangs thrive. In 2006, Maldives saw its first gang violence; the first gang killing followed two years later. Now bodies of teenagers regularly turn up in parks – victims of ongoing gang wars. Two members of Ibrahim's gang have been killed this year, obliging their leader to order what he called "revenges".

Ibrahim himself joined his gang at the age of 14 in his neighbourhood of Henveiru. He was expelled from school shortly afterwards and rapidly rose through the ranks, selling drugs on the streets and fighting with other gangs when needed. "I've stabbed a lot of people – and been stabbed six times myself. I've never killed anyone, at least not yet. We usually aim to disable people permanently. Paralysis, that's worse than dying," he said.

Ibrahim's outfit of more than 70 members works around the clock, trafficking heroin, enforcing its territory and carrying out what he calls "political work". Ibrahim asks for 10,000 Rufiyah (£400) for 10 of his gang members to attend a demonstration for an hour. The rate charged for roughing up a political opponent – damaging his car or house – is between 25,000 and 50,000 Rufiyah (£1,000-£2,000), but for a stabbing the price would be much higher: £15,000 at least. "It's not bad, enough to pay our expenses for a month," Ibrahim said.

Corruption means police officers can easily be persuaded to "lose" evidence and judges can be bought off. Nor is prison much of a deterrent. Phones, cigarettes, DVDs, "anything except women" is easily available. Mohamed Jameel, the minister for home affairs, said some political parties "continuously seek the involvement of gangs in their activities".

"Development doesn't just bring good things," he said. "We have a lot of unemployed youth, dropouts end up on the corners of the street, there is peer pressure and it is easy for them to be recruited." Spokesmen for major parties contacted by the Guardian all denied any contact with criminals. But a recent report by the Asia Foundation, based on interviews with more than 130 gang members, also found that most political parties use gangs.

Dr Aishath Ali Naaz, its author, cited bullying and family problems as well as the rapid but unequal economic growth in Maldives in recent years as contributing to the violence. "There have been losers as well as winners. Youth unemployment is very high," she said.

Widespread narcotic use is also a significant factor. One recent survey found that as many as one in 20 of Male's inhabitants is a regular user of heroin or cannabis. Mohammed Shoaib of Journey, an NGO set up to help addicts, said more than 100 users register with them at their central Male office every month, more than ever before. "It's easier to buy heroin than a pizza," he said. "If you call for a pizza, it takes half an hour to arrive. The drugs take minutes."

In tough neighbourhoods, the gangs play a role as a surrogate government, too. Ibrahim said the local community "respected" his gang, particularly after he paid for a children's playground. The fear is of a downward spiral in the Maldives, accelerated rather than slowed by the country's squabbling politicians, leading to more violence.

"The gang members are getting used to greater and greater severity of violence. So is society more generally. Once if someone was stabbed, everyone would be talking about it so much. Now people barely notice," said Naaz.

Already, Ibrahim said, there are clashes, some fatal, between gangs working for different political parties. Casualties would be much higher if the gangs had firearms, he said. But Ibrahim hopes to leave soon. He has made enough money, he says, and, following a near-fatal stabbing 18 months ago, wants "a quieter life". "I'm not sure where I'll go," he said, "Maybe [Sri] Lanka. Maybe India. Out of here anyway."

The Maldives

Political history: a Muslim sultanate for nine centuries, later a British protectorate, the Maldives have been independent since 1965. In 2008, Mohamed Nasheed won presidential elections. He resigned in February this year and was replaced by Mohammed Waheed Hassan Manik.

Geography: made up of 1,200 islands in the middle of the Indian Ocean. Threatened by climate change, with 80% of the area 1 metre or less above sea level.

Population: 400,000, 99% Sunni Muslim. More than 110,000 people live in Male, the capital.

GDP per capita: $4,300. Biggest industries are tourism and, far behind, fishing.

Literacy: 98%