Islamic finance System by British Government

The British government has recently issued a policy on sharia-based loans. The British government has recently approved a loan of sharia for Muslim students. This is done to help the Muslim students in the UK to address the rising costs of education. This is also done as a step that is expected to increase the number of Muslim students at universities in the UK.

In a report published by the Department of Business Innovation & Skills (BIS), the government has provided a response on this. The government approved the sharia system where student loans are borrowed money then he will not pay it back with interest to a third party, which is not in appropriate to Sharia law. The study also was conducted to determine the best Islamic products for Muslims students. Islamic finance system model of "Takaful" was selected as a product to be offered to Muslim students. The announcement came four months after the government investigated the so-called alternative financial insurance products based on sharia.

image source: tribune.com

The government says it has worked closely with the Bank of Britain and other Islamic finance experts. This cooperation is intended to develop a model of Islamic insurance as a potential alternative to conventional loans to students. Takaful fund will be established with an initial amount of money that can be donated on the basis Qardh Hasan (interest free loan). The system is also based on the concept of participation and co-insurance.

After extensive consultation, involving about 20,000 people, 93% said students on the basis of religious objections to the charging of interest as a result of changes in tuition fees and student loans. Most of the Muslim students said the latest rise in the cost of education, which has been applied in 2012, forcing them to leave the university because they see the system of interest on loans for tuition models that are contrary to the principles of their religious beliefs. Therefore, to overcome this problem, the government has adopted a policy that is expected to be more wise for all parties.