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Apr 08 2014

More circuses

The Tories want to introduce interest-free loans for students!

Oh no wait, it’s not for all students.

A new system of “Sharia-compliant” student loans is to be launched to allow more Muslim students to go to university, it has been announced.

David Willetts, the Universities Minister, said an alternative financial model was being created to satisfy Islamic law that forbids Muslims taking out loans that make interest.

Under the system, students would apply for taxpayer-backed loans but repay them into a mutual-style fund that would be ring-fenced to provide future finance to other students with the same religious beliefs.

The move will raise concerns over a two-tier system in which Muslim students pay less than other undergraduates.

But the Government insisted it would be set up in a way that ensured repayments were made at the same rate as students who take out traditional student loans.

How? How can that work? If the loans are “sharia-compliant” and thus don’t make interest, then how can they not be cheaper than non-sharia-compliant loans that do make interest? If you take interest out of the equation, then loans become free, which is obviously cheaper than not free. Interest is the cost of borrowing; no interest, no cost.

Is the idea to rig it in such a way that the students with sharia-compliant loans do pay for the loans but in a way that’s not called “interest”? That seems…childish.

The plans have been set out in a consultation document published by the Department for Business, Innovation and Skills.

It says the Student Loans Company will create a completely new fund based on the “Takaful” structure used in Islamic finance – allowing groups of people to cooperate to provide mutual finance assistance to other members of a group.

Students will borrow up to £9,000 a year to cover tuition fees and start to repay when they earn more than £21,000 – the same as the traditional model.

The document says: “The principles of Sharia law recognise the value of money over time. Given the long period over which most students would make repayments into the fund, the total contribution they would be obligated to make would be based on a benchmark.

“This benchmark would be set relative to the traditional loan system and would ensure that students who made use of either the alternative finance product or traditional loans would be treated the same.”

So it’s basically just repackaging. “Based on a benchmark” is a roundabout way of saying “interest.”

Let’s start thinking up some atheism-compliant stuff we need.

11 comments

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  1. 1
    Andrew B.

    “How? How can that work? If the loans are “sharia-compliant” and thus don’t make interest, then how can they not be cheaper than non-sharia-compliant loans that do make interest?”

    They could compensate non-muslim students with a £1,000 gift card to Boots and one free entrée from Gourmet Burger Kitchen.

  2. 2
    John Horstman

    Um, I have a religious* objection to capitalism in all forms, not just loan interest – can I opt out completely? Get any/all goods at-cost with 100% of the money going directly to the workers who actually perform the labor that gives whatever good or service I’m purchasing value?

    *My socialist convictions are totally religious – sure I think they’re based in reality, but lots of people would disagree on that point!

  3. 3
    Kevin Anthoney

    I think the way this works is as follows. If you go to your friendly local non-sharia bank for a loan of $10,000, they might lend you the money at 6% p.a. over three years, in which case you’ll pay $303.50 per month for 36 months, which is $10,926 in total.

    The sharia bank, on the other hand, will buy the thing you want for $10,000 and then sell it to you for $10,926, and they’ll agree to let you pay it back in 36 installments of $303.50.

    Looks the same so far, but there are differences. For instance, if you miss a payment a non-sharia bank will add extra interest, whereas a sharia bank isn’t allowed to do that – once the bank’s agreed a price, that’s the price and they aren’t allowed to change it. I don’t know what they are allowed to do instead.

    There are other sharia-compliant schemes, but I don’t remember what they are, and don’t care much.

  4. 4
    RJW

    Interesting that the Tories have introduced this Dhimmi policy, because–

    1 Conservative governments seem to be rather reluctant to pander to the demands of minorities and sceptical in regard to institutionalised multiculturalism.

    2 Since the loans are ultimately provided by the Kaffir state, are pious Moslems obliged to repay them?

  5. 5
    Pierre Masson

    Allah must not be the sharpest knife in the kitchen drawer if he doesn’t see through those shenanigans. This is very similar to the short-term marriages permitted by sharia law. See http://muslimvillage.com/2013/04/18/38489/short-term-muslim-marriages-boom-in-india/

  6. 6
    Alex SL

    This is what happens when religious rules contradict basic human desires and necessities. A Rube Goldberg workaround is found that makes it possible to do what is necessary but it leaves both sides looking hypocritical and, yes, the god in question looking naive and stupid. But well, if the alternative is not having a functional economy, and discarding the harmful religious rules is not an option, what can you do?

  7. 7
    H2S

    There is a whole ludicrous industry of Islamic finance – time value of money denialists.

  8. 8
    RJW

    @7

    Yes, and Moslems don’t appear to have any general objections to accepting interest-tainted taxpayers’ funds and goods provided by infidel economies, whether it’s education, welfare or consumer items.

  9. 9
    Enzyme

    I think Kevin (#3) is right. And I’m going to come out and say that I think that this is a decent idea from the government.

    It doesn’t make things any better for Muslim students than it does for others; however, what it does do is mean that muslim students who wouldn’t otherwise have gone to university because they couldn’t get a loan appropriate to their requirements can now get one, and so have an increased chance of going to university – and maybe even in a different town. That has to be a good thing, no?

    Essentially, offering loans like these is not so different in principle from a restaurant deciding to offer a vegetarian option to meet the requirements of vegetarian would-be diners. Take away the word “Muslim”, and the story becomes a whole lot less remarkable.

  10. 10
    Deen

    Why not just make all loans use the “interest-free” system? If you want to accommodate orthodox Muslim students, but make sure everyone is paying the exact same fees, that would be the simplest, cheapest, fairest way to do it. None of this “separate but equal” crap is necessary.

  11. 11
    Kevin Anthoney

    #10:

    Why not just make all loans use the “interest-free” system?

    I’d agree that if they’re going to make sharia loans available they should make them available to everyone, Muslim or not, especially as it’s the Government. I’d rather have a choice of sharia or non-sharia though.

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