Sharia-compliant student finance might be coming. It might not

When the Westminster government’s announcement on “rip-off” degrees appeared last week, an update on Sharia-compliant student finance was conspicuous by its absence.

Given some Muslim students have been waiting for its introduction since David Cameron promised it would happen a decade ago, this was deeply frustrating.

Never again should a Muslim in Britain feel unable to go to university because they cannot get a student loan – simply because of their religion.

But then on Friday morning – the “take out the trash” day where updates and announcements are often buried in the hope that nobody sees them – the Department for Education (DfE) published an update on progress in introducing a “takaful” alternative student finance product, orphaned away form the rest of the higher education reform response.

Despite the apparent embarrassment, on the face of it the news is pretty positive. The new finance system will be certified as being Sharia-compliant, using the Islamic finance principle of Takaful, to provide a form of group based mutual support.

Students will apply for an alternative payment for both their tuition fees and living costs instead of an interest-bearing loan. They will apply in the same way as a traditional student loan, through Student Finance England, and will repay contributions that are then ring fenced to help future students so the fund is only used for providing alternative student finance.

DfE says it’s working with the Islamic Finance Council UK to make sure that the alternative student finance system it introduces is compliant with Sharia law, having legislated to allow in the Higher Education and Research Act in 2017 and undertaken further research to check potential students’ views on alternative finance in 2019.

Quite what is taking the time to create the necessary secondary legislation and get the Student Loans Company up and running on the new system is unclear – we are told that as alternative student finance needs to mirror the lifelong loan entitlement, DfE can’t introduce alternative student finance until this is in place – which seems like a bizarre excuse.

On implementation, the note says that”

From 2025, we are introducing a more flexible student finance system called the lifelong loan entitlement… alternative student finance will form part of the changes to the whole student finance system.

We read that as introduction from September 2025, although former DfE SpAd Iain Manfield was keen to point out that that may be optimistic:

It takes real talent to both upset the constituency you’re trying to please by dragging out a policy solution by over a decade, only to in the process cause others to question whether the wider reforms it’s being buried it will also be delayed. Congrats all round.

One response to “Sharia-compliant student finance might be coming. It might not

  1. Sharia compliant loans may de facto be a reality due to inflation and the cap on the interest rate. Pegging interest at inflation (so there is no profit) is one of the necessary conditions for Harem. Other conditions include there not being an alternative to taking a loan. As Labour recently indicated they will not be reintroducing grants if elected and the Government is likewise not inclined to do so, that is a second necessary condition fulfilled.

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