Sharia Law

Islamic Shariah Law prohibits interest-related transactions. A spokesperson from the Department for Business, Innovation and Skills (BIS) stated that (for pre-2012-entry students) “student loans do not incur a real rate of interest and the government does not make any profit out of these loans”. However, for students commencing study from 2012/13 onwards, interest will be charged at the rate of inflation plus 3% (according to earnings).

Students would need to conduct their own research and consult a religious adviser/scholar. They may be advised to investigate alternatives such as interest-free loans from Islamic banks; private trusts; look for part-time work; utilise family resources; as well as the non-loan funding allocated via their funding provider (e.g. Student Finance England). Some banks offer Shariah-compliant accounts. Here is one such example:

Al Rayan Bank Sharia Compliant Current account

You can also investigate other forms of interest free borrowing, such as:

Qard Hasan Interest Free Funding and LaunchGood

Future plans for student funding

Following discussions with the National Union of Students (NUS) and FOSIS, the Department for Business, Information and Skills has now completed a consultation exercise. The purpose was to obtain views from students, Muslim communities, and the wider public, on the acceptability of an Alternative Finance product based upon the Takaful Model.

The feedback received indicated that the proposal would meet the needs of the majority of students concerned about interest charges. The Government will now begin to examine what may be required to allow this product to be offered to students through the Student Loans Company. Additionally, legal changes will also be sought and the Government will continue to work with Islamic finance specialists to refine the Takaful model into a functioning product.

Given the complexity of these issues and the time needed to resolve them, it is unlikely that any alternative finance product would be available any time soon.

Useful contact

(Imam) Mohammed Laher, DMU Muslim Chaplain



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