Imagine being a young Muslim in UK today. You are attached to your religious belief – which tells you that lending money at interest is prohibited in Islam – but you want to continue your education and go to college. You need financial support, but you have a dilemma. The only funding available is a government guaranteed student loan, which bears interest.
After a three-month consultation on Sharia-compliant student finance, the the government announced On September 4, he plans to propose legislation to create an alternative financing product that complies with Islamic Sharia law, which explicitly prohibits usury or interest charges. This is good news for young Muslims in Britain.
Nothing can be better for the peace and stability that we all aspire to in the world than well-educated, open-minded Muslims who are able to see through and resist the teachings of those who preach hatred.
And that is why Prime Minister David Cameron was so right at the World Islamic Economic Forum in London last October. when he said that: “Never again should a Muslim in Britain feel unable to go to college because he cannot get a student loan, simply because of his religion.”
£ 9,000 in fees caused big problems
When student loans were first introduced, the intention was never for a student to be faced with such a binary choice: either to go to college and have a conflict with their religious beliefs, or to stick to these. beliefs and not going to college.
When the tuition fee was £ 3,000, Muslim students fell into one of three categories. They applied for a student loan and weren’t concerned about paying the interest; they applied for a student loan, but were uncomfortable paying interest and would have preferred Sharia compliant funding; or they borrowed money from family and friends to avoid paying interest.
But when tuition fees rose to £ 9,000 in 2012, the third category became untenable due to additional costs – a point the government acknowledged in its response to the consultation.
Embrace Islamic Finance
The UK government has already shown its readiness to act quickly when it comes to the Islamic finance industry. At World Islamic Economic Forum – the first to stand outside the Muslim world – Cameron announced that the British government would launch the first sovereign sukuk, an obligation in accordance with Islamic Sharia law. This was a major undertaking for a Western government that should not be underestimated – especially since it was launched eight months later at the end of june 2014.
No less important are the government’s efforts now to find a solution to domestic needs.
At Bolton, we were involved with the Department for Business, Innovation and Skills (BIS) to test some of the early attitudes of students to this issue. Much of the initial thinking focused on a loan backed by Murabaha, which is related to commodities and is one of the most popular and understood forms of Islamic finance.
From the government’s response to the consultation, we learned that five Islamic finance structures have been considered. Each was measured against traditional student loans to ensure repayment and debt levels were the same, with no disadvantage or benefit to Muslim students.
‘Takaful’ a good option
Working with experts in Islamic finance, Sarah Webb and her team at the BIS decided that these criteria could be best met by “Takaful, Essentially a cooperative where funds are deposited for the mutual use of group members. For student loans, this would mean that a student agrees to repay the money he borrows from the fund once he starts working. This is considered a charitable contribution under Sharia law, benefiting all members of the fund.
The government is to be commended, not only for an imaginative solution, but because the very essence of Takaful, which emphasizes not only helping oneself but also helping others, s’ accords very well with education. Given the ethical dimension of mutual aid implicit in Takaful, it is quite possible that reimbursement rates are high. Maybe this should even be a template for the whole student loan book?
As always, the success and acceptance of a program depends on understanding it. The government should make it clear, when legislation relating to this program is under consideration in parliament, that Muslim students do not receive favorable treatment – and that they do not obtain any advantage over students, that ‘they are of other faiths or none. They pay the exact same thing, but they just pay in a different way.
The success of the program will also depend on the assurance to Muslim students that it is a true Islamic financial product. This will be accomplished through the authenticity of those who bless him. The Sharia Supervisory Board must be of the highest quality and respected internationally, so that no student can question their authority or doubt the contract in which they enter into.
Because there are differences in Islamic schools of thought, which have unfortunately recently deepened, I would recommend seeking the advice and accreditation of the Fiqh Academy Council, which is part of the Organization of Islamic Cooperation (formerly the Organization of Islamic Countries) in order to gain the fullest support of the Muslim community at large. This would help ensure that it is accepted by all sects.
This in no way detracts from the respect and appreciation that is due to the other Sharia committees that sanctioned this program in the first place and to whom we should all be very grateful.