UK launches landmark sharia-compliant student loan scheme
The U.K. government has announced plans to roll out one of the world’s first state-supported student loan schemes compliant with Islamic law
LONDON (MNTV) — The U.K. government has announced plans to roll out one of the world’s first state-supported student loan schemes compliant with Islamic law, aimed at ensuring Muslim students can access higher education without compromising their faith.
The Department of Education (DoE) confirmed on that “secondary legislation” will be introduced to establish the new program, known as the Alternative Student Finance (ASF) provision.
The system will be available to students from late 2026.
Under the ASF, students will no longer pay interest on government-backed loans.
Instead, the program will operate according to the Islamic principle of Takaful, a cooperative model where money is pooled and invested for the benefit of participants.
Funds will be provided to cover both tuition fees and living costs. After completing their studies, graduates will make income-based “contributions” into a shared Takaful fund. These contributions will then finance future loans for other students, creating a sustainable, sharia-compliant cycle of support.
The scheme will be overseen by an Islamic Finance Supervisory Board (IFSB), with the U.K. Islamic Finance Council (UKIFC) serving as its secretariat. This ensures the ASF meets the highest standards of both government regulation and Islamic finance principles.
The DoE explained that some Muslim students feel unable to access traditional student loans because Islamic teachings prohibit paying or receiving interest. The new provision addresses these concerns, ensuring students are not excluded from higher education opportunities.
The initiative has been welcomed as a major step forward by Muslim organizations, including the Muslim Council of Britain (MCB), which has supported sharia-compliant finance models since at least 2016.
Building on the UK’s global leadership in Islamic finance
The ASF program builds on the U.K.’s growing reputation as a global hub for Islamic finance. In 2014, the U.K. became the first non-Muslim country to issue Sukuk (Islamic bonds), raising £200 million under then-Prime Minister David Cameron.
A government report at the time, UK Excellence in Islamic Finance, noted that the move had “cemented the U.K.’s position as the western hub for Islamic finance.”
Cameron highlighted that London had already become a center for sharia-compliant banking, with more than a dozen banks offering Islamic finance products and all major professional services firms developing specialist teams.
Earlier, in 2006, former Prime Minister Gordon Brown said Britain was well placed to become the gateway of Islamic finance in the West.
Since then, the sector has grown rapidly, moving from “an almost no-go area” to a sought-after industry.
With the ASF, the U.K. is set to extend that same spirit of innovation to higher education finance.
By combining government support with Islamic financial principles, the policy ensures Muslim students can pursue their studies without compromising on faith — while reinforcing the U.K.’s global leadership in ethical and inclusive finance.
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