Authored by Steve Watson via Modernity,
British universities are now openly advertising government-backed "interest-free" student loans designed around Islamic finance rules.
The Alternative Student Finance product, based on the principle of takaful, replaces interest with a mutual "contribution" that is ring-fenced to fund other students on the same scheme rather than flowing back into the Treasury.
Official forecasts already expect nearly half of student debt never to be fully repaid, so British taxpayers will underwrite the shortfall while the ring-fenced pot serves a program primarily aimed at Muslim students, the Telegraph reports.
British universities are preparing to offer interest-free sharia-compliant loans to Muslim students, with repayments used to fund others joining the scheme rather than going to the Treasury. The plans have sparked concerns that they could create a "two-tier system" in higher education. ? https://t.co/pB9wmbam8j
— The Telegraph (@Telegraph) November 10, 2026
The scheme is open to anyone eligible for student finance, yet it exists because Islamic law prohibits interest.
Universities including University College London, Bristol, Leeds, City St George's, Newcastle and De Montfort have begun telling applicants the loans could be available in the 2026-27 academic y
