CAIRO – In a move expected to increase the number of Muslim students in British universities, the UK government has approved new charitable Shari’ah-complaint loans for Muslim students to increase diversity in campuses.

“We will introduce an alternative finance system to support the participation of students who, for religious reasons, might feel unable to take on interest-bearing loans,” the White Paper was quoted by The Telegraph on Tuesday, May 17.

“We have heard that some students will not access higher education in these circumstances, some will access higher education and use loans but will be troubled by their situation, and others will restrict their choice of course or institution to try to minimize the sums involved.

“To ensure participation and choice are open to all, we plan to legislate for the creation of an alternative model of student finance.”

This white paper sets out our plans for the next 5 years, building on and extending our reforms to achieve educational excellence everywhere.

The new “Takaful” model would allow students to make payments to a communal pot that would then benefit future students wanting to go to university.

The idea of the loans was suggested by Dr Samir Alamad a member of the Shari`ah Supervisory Committee.

“In the Islamic faith there is a strong prohibition against dealing with any sort of interest in any sort of financial transactions,” he said.

Under the usual arrangements, students repay their loans to the Government when they start earning £21,000 and pay an interest of 3 per cent or more depending on their earnings.

However, under the alternative finance arrangements, Muslim students would pay an “agency fee” of 3 per cent or more depending on earnings and the money they pay into the fund constitutes a “charitable contribution”.

Dr Alamad addressed concerns that this fund might just be a change in names, saying: “This is different. People pay back to the fund so future students can benefit from it rather than paying back to the Treasury. It’s about giving back to the community.”

Britain is home to a sizable Muslim minority of nearly 2.7 million.

There are 400,000 Muslim students in British schools, according to the Muslim Council of Britain (MCB).

There are nearly 90,000 Muslim students studying in higher education institutions.

Islam forbids Muslims from receiving or paying interest on loans.

Introducing the Shari`ah compliant loans, would change minds of many Muslim students who decided earlier not to join universities due to the loan interest, according to the Federation of Student Islamic Societies (FOSIS).