When will halal student loans finally be introduced?
Eight years ago David Cameron promised an end to the discrimination Muslims face when it comes to student loans … but nothing has changed. Why?
When tuition fees were controversially raised to £9k a year in 2012, it affected Muslim students the most.
Introduced by Labour in 1998, tuition fees rose progressively in the subsequent years but it was the coalition government and the Tory-led austerity drive that saw the marked rise in fees. It meant most students had no option but to take out interest-bearing loans to pay for their tuition fees.
Many Muslims have decided against going to university because of these loans. Many more have begrudgingly taken the loan or have found other ways to finance their studies —through scholarships, grants, part-time work and by borrowing from friends and families.
The UK government started talking about a sharia-compliant alternative in 2013 but in 2021 there is still no such financial product. And as the government stalls on making any decisions, many Muslim students are still missing out.
Birmingham City University has launched the UK's first course in Islamic finance
In 2013, David Cameron at a World Islamic Economic Forum heralded the UK's leading role in Islamic Finance. As part of that talk, he mentioned the government’s commitment to open up new forms of student loans for Muslim students.
“Let me be clear what this means,” He declared. “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.”
In 2014, the government started exploring how it could offer sharia-compliant loans to students wishing to attend higher education.
The consultation launched to check the appetite for an alternative financing model had an overwhelming 20,000 respondents — a record at the time. It obtained views from students, the Muslim community, and the wider public.
Having spoken to experts in Islamic finance, the Government identified the ‘Takaful’ model — a non-interest-bearing Islamic product that allows lenders to provide credit — as a potential alternative.
“The structure’s a co-operative model, rather than an interest-based loan,” says Islamic Finance Guru’s Ibrahim Khan “You’ve got a pool of money and the members of the co-operative take the money out when they need it and then put it back in afterwards.
“Economically, it’s exactly the same as mainstream student finance. Muslim students pay the same as the non-Muslim students.”
Eight years later
All that happened many years ago. Aside from passing some related legislation back in 2017, nothing substantial of note has happened since. And, crucially, no timeline has been given as to when the halal loans will finallybe introduced.
This year, the NUS said the delay was ‘discriminatory’ and ‘simply unacceptable’. “Young people should not miss out on university simply because of their religious beliefs,” it added.
In January, the government responded to a petition (which urged it to implement the alternative financing as soon as possible) saying it would provide an update in due course.
“We have appointed specialist advisers in Islamic finance to advise us on the design and implementation of a suitable product,” read the statement. “We have been working through the complex range of policy, legal and system issues that need to be resolved, in order for us to develop and eventually launch a sharia-compliant alternative student finance product.”
Ibrahim sees no real substance behind the reasons for the delays. “There are no legal obstacles, no parliamentary or statutory obstacles. Yes, there is a policy obstacle — that’s just code for ‘we don’t want to do it right now.’”
“Fair enough we’ve had two major things — like Brexit and Covid — which have taken the focus. But it doesn’t mean policy just stops. Lots of things have been implemented, and keep on getting implemented, over the last eight years. This should be no different.”
One politician who has consistently pressed the government on the issue has been Liberal Democrat peer Lord Sharkey.
“I have repeatedly asked the government the reasons for this lack of action,” said Lord Sharkey in a Lords debate in April.“I have never had a substantive response.”
“In fact, if you look at the government’s record on all this, it is very hard to see it as anything other than discrimination against our Muslim community— not just discrimination but a failure to engage and to explain.”
Responding to his comments at the debate, government representative Lord True said an update will be made at the next multi-year spending review later in the year.
Ibrahim points out that this delay means more Muslim cohorts will again miss out on being able to take out a sharia alternative loan.
“The government has kicked it down the road,” says Ibrahim. “We obviously want it to happen sooner. If they talk about it in October/November then it won’t be implemented for at least another year. So you’ll probably end up missing another couple of student generations.”
The toll on Muslim students
Muslim students will be hoping any update will, at least, include some visibility of when the alternative loans will finally be available.
“It will mean a lot more Muslims going to university,” says Ibrahim. “And the ones that go to university and have taken a non-compliant loan, they’ll feel less guilty and have less mental pressure as well.
“That’s the hidden cost we don’t really mention. My wife and various family members have had to take out a student loan. They're not happy about it. If they had an alternative, they would’ve 100% taken that alternative.”
The recent report into Tory Islamophobia showed the party needs to do a lot more to engage with Muslim communities. The swift introduction of sharia-compliant student loans will go a long way in showing that the Tories are serious about repairing that damage.
It will also mean the government finally fulfils the promise it made to the Muslim students eight long years ago.