UK Introduces Shariah-Compliant Loans For Muslim Students

London -In a move expected to increase the number of Muslim students in British universities, the UK government has approved new Shari’ah-complaint loans for Muslim students, to help students overcome the latest rise in education fees.

Students taking part in the Takaful model “would not be borrowing money and paying it back with interest to a third party, which would not be compliant with Sharia law,” according to the government response in a report published on the Department for Business Innovation & Skills (BIS), Al Arabiya reported on Wednesday.

“Instead the Takaful fund will be established with an initial amount of money that can be donated to the fund or on the basis of Qard Hasan (interest-free loan) and based on a concept of mutual participation and guarantee.”

After extensive consultations with around 20,000 people, 93% said students with religious objections to the charging of interest had been affected by the changes in tuition fees and student loans.The announcement came after four months of consultations on the so-called “Sharia-compliant Alternative Finance Product.”

A huge percentage of Muslim students said the latest rise in fees, applied in 2012, forced them to abandon universities for finding the interest system against the principles of their faith.

One said: “Students, including myself, chose to stay at home through their higher education in order to take only the minimal loan necessary to avoid extra interest.

“Most significantly in my opinion, this seriously limits the options of universities that they can apply to as they can only apply to ones within a reasonable commutable distance.

“This might mean that they miss out on courses only available at specific universities, or miss out on applying for the best universities for their course of interest.

“This can hinder these students from the best career for themselves that they could possibly have achieved otherwise.”

“Takaful” Solution

After consultations, the “Takaful” Islamic finance model was selected as a potential product to be offered to Muslim students.

The government said it has been “working with the Bank of Britain and other Islamic finance experts to develop the Takaful model as a potential alternative to conventional student loans.”

“The overall message is that an Alternative Finance product would be welcomed by the majority although the Government would need to undertake further work to provide greater clarity,” the government said.

Britain is home to a sizable Muslim minority of nearly two million.

There are 400,000 Muslim students in British schools, according to the Muslim Council of Britain (MCB).

There are nearly 90,000 Muslim students studying in higher education institutions.

Islam forbids Muslims from receiving or paying interest on loans.

Introducing the Shari`ah compliant loans, would change minds of many Muslim students who decided earlier not to join universities due to the loan interest, according to the Federation of Student Islamic Societies (FOSIS).

Originally published on www.onislam.net