Muslim students divided on sharia-compliant loans

April 22, 2014


Muslim students are divided about government moves to introduce student loans that comply with sharia law. Muslim groups have been pressing hard for reform because the rise in tuition fees in 2012 brought with it the expectation that students would take out loans and pay them back, with interest, once they had well-paid jobs.

The Department for Business, Innovation and Skills – which is running the consultation – says: “We know that some students, whose religious beliefs forbid the taking out of a loan that incurs interest, may be unable to take advantage of student loans because of this change. This could make it more difficult for them to get a higher education. We’re exploring the possibility of making an alternative student finance scheme available alongside traditional loans. This funding would be sharia-compliant and overseen by a sharia advisory committee.”

Most Muslim students have applied for loans and are intending to go to university regardless of reforms. If anything, it’s the size of the fees that are of most concern to them, just like it is for most other students. But many other Muslim students will welcome this move because it could remove a barrier to their educational aspirations. Muslim organisations such as Fosis (the Federation of Student Islamic Societies) say they know of many Muslims students who decided against going to university because of the new system of student loan repayments.

Under the government’s proposed fund pooling (takaful) model, a special sharia advisory committee would oversee a fund that would be fed by students repaying money once they are in employment and earning over a threshold. The repayments would be set against a benchmark rate equal to that of a conventional student loan. The idea is that such a system would allow students to avoid paying interest, and the pool of funds generated by the repayments would be used to benefit future students. The government has insisted that despite concerns raised by some commentators, Muslim students will be no better off than their contemporaries under any new scheme, and their repayments will be in line with those of students who take out traditional loans.


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