The British Government will introduce Sharia compliant student loans enabling more Muslim students to go to University. The Department of Business, Innovation and Skills has responded to the results of a consultation that they carried out earlier this year into the feasibility and demand of proposals to introduce a Sharia compliant form of student financing.
The government has formally supported the proposals stating that the Department found that there is both demand for alternative student loans and general acceptance that these would be compliant with Sharia law, enabling more Muslim students to take up student loans in order to afford to go to University.
The government are recommending introducing an Alternative Finance product based upon the Takaful Model used in Islamic finance to allow groups of people to cooperate to provide mutual finance assistance to members of the group with the repayments being used to provide finance to future students who select to join the fund. This type of mutual fund model is familiar to Sharia scholars and many UK Muslim families, who use a similar concept to raise funds between cooperating relatives.
Under the Government’s Plans, after graduation the student would begin to make repayments back into the fund once they were in employment and earning over the repayment threshold currently at £21,000. These repayments would be equal to those that would have been made if the student had taken out a traditional loan, which is 9% of their salary. Repayments would be collected in the same way as repayments for a traditional loan, with no difference to the overall amount being repaid between the two types of loans.
The consultation found that out of the 19,886 respondents to the survey, 83% thought that students with religious objections had been affected by the changes in tuition fees, whilst 94% thought that there is a demand for Sharia student loans. The consultation showed that respondents thought that Sharia backed loans would remove financial and religious barriers for Muslim students and therefore increase those attending University. The overall message is that Sharia student loans would be very much welcomed but the Government would need to undertake further work to provide greater clarity on how the alternative financial product would work and accepted as Sharia compliant.
The Government requires changes to primary legislation to enable the Secretary of State to offer Sharia student loans. The final introduction of these loans may take some time given that an appropriate legislative window would need to be identified as well as further consultation with other Government bodies such as Her Majesty’s Revenue and Customs and the Students Loans Company.
David Ward, MP for Bradford East, has welcomed the Government decision. Commenting David Ward MP said: “It’s very welcome news that the Government has decided to introduce Sharia compliant student loans. This is something that I have been working on since being elected.
“There is clear demand for Sharia student loans within the Muslim community and evidence to suggest that these loans would enable many, who have been or will be prevented from undertaking both Further and Higher Education, to attend university by removing the conflict between faith and funding.
“This is not about treating people differently, but making different financial products available to suit different circumstances to enable everyone to afford to go to University.
“The most important aspect of this product is that no student will in anyway be disadvantaged or advantaged with both the size and amount of repayments being equivalent between the two systems. “This is another example of the Government listening to people’s concerns and acting to bring about a stronger and fairer society for all.”