The UK government is preparing to launch one of the world’s first state-backed student loan programs compliant with Islamic finance principles. The initiative, known as Alternative Student Finance (ASF), is expected to become available in late 2026, following the passage of enabling secondary legislation, according to the Department for Education (DfE).
Under this new model, students will not be charged interest on loans—a practice prohibited under Islamic law. Instead, the scheme will function under the principle of Takaful, where pooled contributions support financial aid for current and future students. After graduation, participants will repay the support they received through income-based contributions to the fund.
The ASF will be overseen by an Islamic Finance Supervisory Board (IFSB), with the UK Islamic Finance Council (UKIFC) acting as its secretariat. The initiative aims to accommodate students who refrain from taking conventional loans due to religious restrictions, particularly within the Muslim community.
“Some individuals are unable to access traditional student finance options due to their beliefs, most commonly among Muslims, who avoid interest-based financial products,” the DfE website states.
Controversial Figures and Ideological Concerns
Despite being positioned as an inclusive move, the ASF rollout has drawn criticism over its links to figures and organizations accused of promoting extremist ideologies.
The UK Islamic Finance Council, for instance, is closely tied to the All-Party Parliamentary Group on Islamic and Ethical Finance, which operates from the office of Labour MP Naz Shah a figure previously criticized for past controversial statements, including a 2014 post suggesting the relocation of Israel.
Another associate, Umer Suleman, sits on the UKIFC board and serves as Chief Risk Officer at Wahed UK, an Islamic fintech firm supported by cleric Mufti Ismail Menk, known for inflammatory remarks against the LGBTQ+ community.
Shah has also endorsed The Muslim Vote (TMV) campaign, which in the 2024 general election opposed Labour candidates unwilling to back a ceasefire in Gaza after the Hamas-led October 7 attacks. Critics argue that support for such entities suggests a broader ideological agenda intertwined with the promotion of Sharia-compliant finance.
Islamist Influence and Historical Context
The Muslim Council of Britain (MCB) which has long advocated for Islamic finance—has hailed the ASF as a win. However, the MCB’s own history has raised eyebrows, with its past refusal to participate in Holocaust Memorial Day (2001–2007), support for veiling schoolgirls, and opposition to terror-related bans.
The UKIFC website features M. Iqbal Asaria, described as a pioneer in Islamic finance. Asaria has been linked to domains and organizations associated with radical Islamist groups like Hizb ut-Tahrir and Al Muhajiroun, according to the International Institute for Counter-Terrorism.
Some critics see the ASF as part of a broader normalization of fundamentalist interpretations of Islam within public policy. Tim Dieppe, Head of Public Policy at Christian Concern, questions the government’s endorsement of a “radical interpretation of the Qur’an” through public funding.
“Most Muslims use interest-based finance without issue. Sharia-compliant finance merely disguises interest behind complex legal structures,” Dieppe argues. “Rather than supporting moderation, this policy could foster increased radicalization.”
Academic and Political Criticism
The move comes in the wake of warnings about growing extremism on UK campuses. A report by the Forum for Foreign Relations titled Radicalisation in UK Universities criticized institutions for failing to confront ideological radicalism, citing “institutional naivety or denial.”
Dr. Duane Alexander Miller, an expert on Sharia finance, likened the system to communism: “Appealing in theory, but unworkable in practice.” He added, “If you accept sharia principles for student loans, what’s next? Gender-biased inheritance laws? Non-corporate business structures?”
Islamic scholar Patrick Sookhdeo, in his book Understanding Shari’a Finance, describes it as a form of “economic jihad”—a method to promote Islamist values in secular societies. He notes that several leading Islamic institutions, including Al-Azhar University, have issued fatwas legitimizing interest-based finance, contradicting stricter interpretations.
Longstanding Political Push for Islamic Finance
The UK’s embrace of Islamic finance is not new. In 2014, under then-Prime Minister David Cameron, Britain became the first non-Muslim country to issue Sukuk Islamic bonds worth £200 million. Cameron boasted of the UK’s growing role as a global hub for Islamic finance, a sentiment echoed by former Prime Minister Gordon Brown, who in 2006 declared the UK well-positioned to lead in the sector.
An academic study on the rise of Islamic banking noted the shift in perception over decades—from “no-go area” to “highly sought-after” policy initiative. The industry continues to gain momentum, with support from both political parties and major financial institutions. “Islamic finance is likely to remain a darling of the West for years to come,” researchers concluded.
While proponents frame the ASF as a step toward financial inclusion, critics argue it could legitimize more conservative, and at times, radical interpretations of Islam. The debate raises complex questions about how far secular governments should go in accommodating religious finance, and what consequences may follow when policy intersects with ideology.
(With Inputs From MeForum)
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