LONDON (The Thursday Times) — British universities have begun advertising government-backed, interest-free student loans designed to comply with Islamic law, drawing accusations from Reform UK that Labour is building a “two-tier” education system.
The scheme, called Alternative Student Finance, is meant for students who will not borrow at interest, which Islam forbids as riba. Instead of interest, students pay an equal “contribution” based on takaful, the Islamic principle of mutual support, so they repay the same total as on a mainstream loan. That money is ring-fenced to fund future students on the scheme rather than going to the Treasury. Students of any faith can use it.
The Department for Education has not set a launch date, but universities are already telling applicants it could be available from the 2026-27 academic year. The University of Bristol calls it an “interest-free UK Government loan”, Newcastle University describes it as “sharia-compliant finance”, and De Montfort University says it is “certified as sharia-compliant”.
Reform calls it a ‘two-tier’ system
Suella Braverman, Reform UK’s education spokesperson, attacked the plan. “This outrageous anti-British scheme creates a two-tier education system and divided society,” she said, warning that it risked “creating parallel institutions that are incompatible with the British way of life”.
The government rejects that. A Department for Education spokesman said it was “completely false to assert that Alternative Student Finance arrangements would give favourable treatment to Muslim students”, adding that graduates would repay the same amounts on the same timetable whichever system they used.
Why Muslim students asked for it
A 2021 Muslim Census survey of nearly 39,000 British Muslims found that 80 per cent of students felt conflicted about conventional student loans and 71 per cent believed the system discriminated against Muslims. Not every scholar agrees that ordinary loans are forbidden, and some universities point students to rulings that they are allowed, but the new scheme is aimed at those who still will not take them.
The government has spent more than £365,000 on work by the Islamic Finance Council UK to design the product. As with mainstream student loans, much of which is never repaid in full, the taxpayer will carry the risk of unpaid debt.
The change matters most to Britain’s nearly four million Muslims, the largest group of whom are of Pakistani heritage.
