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In April 2014 we launched a consultation on a Sharia-compliant alternative finance product. The purpose of the consultation was to obtain views from the Muslim community, and the wider public, on the acceptability of an alternative finance product based upon the Takaful model.
Following a positive response to the proposals in the consultation, the government supports the introduction of a Sharia-compliant Takaful alternative finance product available to everyone, and will work on its development.
In September 2012 changes to higher education funding meant that students were able take out student loans for tuition for each year of study. These post-2012 loans carry a different rate of interest, above inflation, to student loans issued before September 2012.
We know that some students, whose religious beliefs may forbid the taking out of a loan that incurs interest, may be unable to take advantage of student loans because of this change. This could make it more difficult for them to get a higher education.
We’re exploring the possibility of making an alternative student finance scheme available alongside traditional loans. This funding would be Sharia (Shariah, Shari’ ah) compliant and overseen by a Sharia advisory committee.
We wish to know if the model scheme addresses potential concerns on the charging of real interest rates on student loans. We also want to know what the demand for such a scheme would be among students and Muslim communities as a whole.