Several UK universities have begun informing prospective students about a proposed Sharia-compliant student finance scheme that would allow Muslim students to access higher education funding without paying interest.

The Alternative Student Finance (ASF) scheme is expected to be introduced from the 2026–27 academic year, although the Department for Education (DfE) has yet to confirm an official launch date, according to a report by The Telegraph.

Under the proposed system, students would make repayments in line with the Islamic principle of Takaful, based on mutual financial assistance, rather than paying interest on conventional loans.

Contributions would be held in a separate fund to support future participants, rather than flowing into the government’s general fund as conventional student loan repayments do.

The scheme will be open to students of all faiths and will not offer lower repayment rates or other financial advantages over the existing system, the government has said.

Universities including the University of Bristol, University of Leeds, University College London, City St George’s, Newcastle University and De Montfort University have already started sharing information about the proposed option.

The initiative aims to address concerns among Muslim students who avoid conventional student loans because of Islam’s prohibition on interest. A 2021 survey of nearly 39,000 British Muslims found that 80% felt conflicted about interest-bearing student loans, while 71% considered the existing system discriminatory.

The government has spent more than £365,000 developing the scheme in collaboration with the Islamic Finance Council UK.

However, the proposal has drawn criticism from opponents, including Reform UK education spokesperson Suella Braverman, who warned that a separate loan framework could create a ‘two-tier’ education system.