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On Sh Haitham’s Student ‘Loans’ Fatwa

The Islamic ruling on the UK Student Finance loan

Paying for university fees has always been somewhat problematic for many Muslim families. Things became much more severe with the drastic rise in student fees in the UK. This has meant that many students are not able to afford studying at university. Student loans have not been much of an option either for Muslims, as many have avoided it for fear of falling into riba (interest). This has led to a large number of young Muslims missing out on a university education, and thus having their working life affected to various extents.

This article will discuss the fatwa given by Shaykh Dr. Haitham al-Haddad in which he ruled that taking student loans is permissible, and that there is no riba involved at all. The Shaykh spent some time researching into this topic, and this article will hopefully shed light on some of the reasoning and evidences behind that ruling, so that the Muslim student seeking to apply for university may find contentment in taking the student loan without feeling that they are falling into sin. The focus will be the fatwa of the Shaykh, although other scholars have given the same ruling. Some of them gave the fatwa using slightly different reasoning to the Shaykh,[1] but the conclusion was the same. I soon intend to write something much more comprehensive mentioning the different opinions of the scholars and their evidences. For now however, this should suffice as a guide to those who are unclear on the subject; especially, those potential university students worrying about taking a loan for their studies. Those worrying should also know that the one who goes with this opinion is by the will of Allah following the view of the majority of scholars and is not following a weak or a minority opinion. This was stated by some of the highly respected scholars of fiqh in Riyadh who considered this opinion the opinion that goes along with the principles of the majority of scholars. Nonetheless, it is a strong opinion held by some highly qualified scholars.

A summary of the fatwa

Shaykh Haitham al-Haddad as well as a number of other scholars and fatwa organisations of the UK and Europe (including the European Council for Fatwa and Research[2]) gave the ruling that it is permissible for Muslim students to take the Student Finance university fee loan, and that there is no interest involved when one does so. This also applies to taking the maintenance loan. This ruling applies regardless of whether one pays back the ‘loan’ later on or not. In neither case is interest involved, and it is therefore permissible for everyone to take the loan, even if they have plenty of money to cover their studies.

Some of the evidences and reasoning of the fatwa

An essential principle that must be understood before understanding the reasoning here is that the concern of scholars when giving a verdict on something is the reality of the nature of that problem at hand; not what it is called. An example is Ginger Beer. It does not matter that it has the word ‘beer’ in its name. If it does not fulfil the conditions of a prohibited drink, then it is permissible. It would be a clear error if someone were to conclude that this drink is prohibited because its name resembles that of a prohibited drink. Similarly, an Islamic bank may call something ‘interest-free’. If the conditions of interest in Islām are fulfilled, then that transaction is prohibited, even if the company has used the term ‘interest-free’. So names and titles should not deceive us into rushing into decisions. This is a well-known fiqh principle agreed upon by the scholars.

The same can be said about the UK student loan. They may say that there is ‘interest’ involved, or that it is a ‘loan’. If the conditions for a loan are not fulfilled, then it is not a loan; and if the conditions for riba are not fulfilled, then it is not interest.

The UK student loans are not typical loans, and do not really resemble the loan that the Islamic jurists of the past spoke of when they spoke about loans. This is apparent in the following points:

  • The loan is not actually paid to the student, so you never get hold of the money in the first place, nor do you have the choice to do with it as you wish.
  • The loan is written off after 25 or 30 years.
  • The loan is cancelled if you become permanently disabled.
  • The loan is cancelled if you pass away.
  • You are not required to pay anything if you do not earn above £21,000, even if you are very rich.

All these things indicate that the loan here is not a standard qardh (loan) that is known by the Islamic jurists. The scholars define a loan as ‘giving tamlīk (ownership) of something, so that the same is returned later.’[3] The element of ownership is missing in the student finance loan. You are not able to spend the money as you wish. This defeats the objective of a loan in the sharī’ah. The loan that the scholars speak of is one that is to be paid off; otherwise it is closer to being a gift. This again, is not the case with the Student Finance loan. One can be earning a decent wage of £16,000 and still not be required to pay anything back. On top of that, the so-called ‘loan’ is hardly a loan because it is written off with so many reasons as mentioned above. A standard loan known in the Sharī’ah is one that must be paid back regardless, unless the creditor later gives permission to drop or cut the loan. Here, the creditor has beforehand given a list of instances when the ‘loan’ is not required to be paid back. So, to call this a loan seems quite far-fetched.

Another key argument here is the fact that the money paid by students is only based on income. This is probably the strongest argument for the permissibility of the student ‘loan’, and should make it quite clear that it is not a loan that fulfils the conditions in the Shari’ah.

The following explains this:

If you ‘owe’ student finance £50,000, then you are not required to give anything back until you earn a salary of at least £21,000 per year. This is regardless of whether you have enough money to pay the ‘loan’ or not.

This means that if you are given £1 billion as a gift or inheritance from a close relative for example, then you are still not required to pay a single penny back to student finance because they only charge on your income. This means theoretically you could be a millionaire and yet you would not need to pay back a penny. Because the agreement obligates payment on your salary and so on only, not all types of money that you have.

This of course goes against all agreed upon types of loans in the Shari’ah. Because anyone who allows you to borrow money from them, expects you to return it back when you have it again. You cannot reply claiming that you will only pay back if you earn a certain amount, because that is not how a loan works. Doing so would be sinful without a doubt. In fact, even if when borrowing the money, you said: ‘I’ll pay you back when I earn again’, you would be obliged to pay the loan back if you have the money, regardless of where that money came from. This is because you only mentioned the salary assuming that that will be your only source of income. Everyone knows however, that if you have millions, you are expected to pay up, even if it is from other than a salary.

The Student Loans Company on the other hand actually does not require you to pay it back unless it is from your salary and the sort. You may have lots of money, and yet you would not be expected to pay the ‘loan’ back.

If it is not a loan, then what is it? A closer look will reveal that it is far closer in resemblance to a contract known as mudharabah (a type of investment). This is where person A wants to invest in something, and works with person B to make a profit which they share. Person A is responsible for making the initial payments, and person B is responsible for doing the work required to make the profit. The percentage that each person takes from the profit is agreed beforehand. Any loss or lack of profit is covered by person A.[4]

This is the nature of the contract between a potential university student and Student Finance. Student Finance covers a student’s study expenses, and their studies should, as a result, increase the chances of their finding a well-paid job which, in turn, allows them to share in the profit that the student makes as a result. The profit is agreed beforehand, because how much Student Finance takes from the profit is made clear, and can be found online. If you do not make the expected profit, then that does not fall on your shoulders, and you are not required to pay anything back. So when you are paying back the money, you are not paying back a loan as they claim. Rather, they are sharing in a portion of the profit. This is exactly how mudharabah works, and mudharabah is permissible according to all the scholars as stated by ibn al-Mundhir.[5]

No doubt, such a transaction is not the first thing that comes to mind when thinking of student loans. We have always simply accepted it to be an interest-based student loan. However, a deeper look into things shows that it resembles mudharabah much more than a loan. It is important to make our main concern the reality of the Shari’ah, and not the intention of the two parties. The issue of intention is clarified further below in the question and answer section. Further, any intricate technicalities that the Student Loans Company agrees with the student, such as the increase of the ‘loan’ and so on, does not affect that this is a mudharabah, because the profit in a mudharabah is left to the two parties to agree on as they wish, as the scholars have explicitly stated. And either way, we have established that this cannot be a loan, so even those who dispute that it falls under mudharabah cannot establish that it is a loan.

This shows the importance of understanding the rulings on business transactions and especially the precision and extensive knowledge required. It is not as black and white as many laypeople think, because the line between alāand harām can be quite fine, and are only apparent to those well versed in Islamic Law. This is shown by the way the disbelievers in Makkah said, as Allāh stated in the Qur’ān: ‘’buying and selling is just like riba.’’[6] They claimed that there is no difference between the two. That is because the difference can sometimes be very minute. However, Allāh the All-Wise knows why one is good for us (and thus permissible) and the other is harmful (and thus prohibited).

Finally, the important fiqh principle says: ‘’all financial transactions are permissible, until it is proven otherwise.’’[7] So the burden of proof is upon the one who claims that a certain business transaction is prohibited. The one who says it is permissible is upon the neutral and original position. This further strengthens the ruling of permissibility. We have seen that it cannot be said that the student loans are clear riba; otherwise there would not be so many scholars who say that there is no riba. So things are to be kept permissible until someone can provide sound and clear evidences to prove otherwise.

A point of advice for Muslims in these circumstances

I finally wanted to comment on what I saw on social media from some of those who first learnt about the fatwa at hand. Statements such as: ‘This is clearly harām’ were thrown about. If indeed, it was that clear to someone who has no expertise in Islamic Law, then it surely would have been even clearer to the many scholars who have dedicated their lives to studying the religion. This is especially the case, since these scholars spent a very long time looking into this matter. So it is important that we Muslims respect our ʿulamā and those who are far more experienced in knowledge, and that we learn to humble ourselves towards them. As the salaf used to say: ‘may Allah have mercy on a man who knows his place.’ We must fear Allāh in rushing into saying: ‘this is harām’ or ‘this is alāl’. Rather, we must refer it back to the scholars who have spent many years at the feet of scholars, and not anybody who is good at public speaking and playing with the emotions of those with weak intellect and hearts.

‘’Say, ‘Have you seen what Allāh has sent down to you of provision of which you have made [some] unlawful and [some] lawful?’ Say, ‘Has Allāh permitted you [to do so], or do you invent [something] about Allāh?’’[8]

Conclusion

I have known Shaykh Haitham to be careful in his rulings, especially when it comes to riba. Despite this, I heard him say: ‘I have absolutely no doubt that there is no riba involved in the student loan’. Several experts in Islamic finance were consulted, and they concurred with his judgment, and some of the scholars even explicitly stated that this is the position of the majority of schools. This should, by the will of Allāh, put some tranquillity in the hearts of those who are so worried about the student loan.’

Below are further answers to queries that people often have relating to this topic. See them for further information as they will give a better understanding of the topic. I did not want to include it in the main article for the sake of conciseness.

And Allāh knows best, and success is from Him alone

Some common questions that relate to this topic

Q1: This is a big topic. Is it enough to rely only on the fatwa of one scholar?

A1: Many brothers and sisters are famous for giving dawah and reminders (may Allāh accept their work), but they are not qualified to give rulings on Islamic topics, especially those topics that are of concern to the wider Muslim community. So we must understand that we can benefit from such speakers only in their fields of giving reminders. If we seek Islamic verdicts, then we must look to those who have many years of experience in the field of fatwa and fiqh.

This article has mainly relied upon the scholars of Europe and the UK. This is based upon the well-known principle that the scholars have mentioned: ‘’a ruling is a branch of understanding the reality of the matter at hand.’’ This means that one cannot give a ruling on something unless he has full understanding of what that thing is. If a scholar wants to give a ruling regarding a certain business transaction, then he must first fully comprehend the nature and reality of that business transaction, so that he may give a correct ruling. It is therefore well known that the scholars of the past used to command people to ask the scholars of their country when it came to issues that may be specific to the people of that country. Allāh states: ‘’But if they had referred it back to the Messenger or to those of authority among them, then the ones who [can] draw correct deductions from it would have known about it.’’[9] The words ‘among them’ is a clear indicator that those most worthy of being asked are those scholars who are from amongst the people. Shaykh ʿAbdul Raḥman al-Sa’di (r) said: ‘’the lay people should not follow scholars from outside their country, because this leads to chaos and dispute.’’[10] This refers to issues that require one to live in that particular country or at least be fully aware of the circumstances surrounding the issue, as is the case with the UK student loan.

We have seen the importance of the above ruling manifested in the student loans problem. Some of the scholars outside the UK were asked about ‘taking an interest-based student loan for studies.’ The obvious reply was that this is prohibited, because the questioner has given the mufti no other choice when he used the words ‘interest-based’. This is a big mistake. Rather, the questioner should have explained the transaction at hand and its nature in full detail. Only then can the mufti give a valid answer.

The scholar who lives here in the UK and understands the circumstances of the country will also be more aware of the consequences of his fatwa, which is another essential principle in the science of fatwa. This is why the great companion, ʿAbdullāh b. ʿAbbās gave two different answers to the same question from two different people.[11] Because he realised that the mufti must understand the consequences of that ruling. Someone living thousands of miles away from the UK will unlikely appreciate the effect his ruling can have on the people of the UK. It is therefore a priority that one asks those people of knowledge in his country.

If the fatwa of one scholar from the UK who specialises in this field is sufficient for us as Muslims to follow, then this is even more so the case if so many other scholars have also given the same ruling (see footnote 2). There is no doubt that this is an opinion supported by many scholars, and one that is sound and valid for every Muslim to follow by the will of Allāh.

Q2: Shouldn’t we laymen do our own research to see what the ‘correct opinion’ is and then follow that, rather than simply trusting the opinion of some scholars?

A2: The concept of the ‘correct opinion’ is subjective. Ask one scholar and he will tell you the correct opinion is this, and another scholar will tell you the correct opinion is that. On top of this, it is unimaginable that a layman who has little or no knowledge of the fiqh of business transactions can come to a conclusion on such a difficult topic. If it took as long as it did for jurists to come to a conclusion, then the layman will not benefit much in trying to come to their own conclusion. Further, the layman will hardly be able to appreciate the evidences and reasoning used by the scholars; and if he manages to understand, then he will not comprehend the significance of each proof. This is why Allāh commanded us to ask the people of knowledge, and He did not ask us to spend a long time doing research to find the opinion that we believe to be stronger, because most people cannot do that. Huge volumes have been written on these topics, so it is unreasonable for us to expect people to read through all this and try to come to a conclusion.

Your duty is find a scholar who you trust (preferably from your country as mentioned above) and who you believe to be qualified in knowledge, and ask them. The answer they give you is what you should then go with, even if you did not do your own research on the topic. This is an agreed upon matter by the scholars of Ahlul Sunnah. As Imam ibn Qudamah (r) stated in Al-Rawdhah, and Imam ibn Taymiyyah (r) in Al-Musawwadah, and Imam al-Ghazzali (r) in Al-Mustasfa; the layman must ask the scholars for rulings relating to their religion, and they are not required to ask for the proofs of the scholar, nor his reasoning. It is enough to follow their fatwa as explicitly stated in the Sunnah. This was something agreed upon by the early scholars, and as ibn Qudamah (r) said, only the Mu’tazilah and other sects disagreed on this issue and said that the layman must also look into the proofs and come to how own conclusion. But this is against the ijma’ of Ahlul Sunnah. No doubt, it is good for the advanced student of knowledge who has studied for many years and perfected the Arabic language and the Islamic sciences to look into the proofs and differences of opinion, but this is not obligatory. It is enough for the layman to follow the ruling of a qualified scholar they trust.

Q3: Neither Student Finance nor the student have an intention that this is an investment, so how can this be an investment. Surely intention matters?

A3: Intention is not always considered, especially when the conditions of the Shari’ah are not fulfilled. For example, if person A tells person B that he wishes to give him a BMW as a gift, but person B needs to give him £1 at least in return. That one pound is so insignificant that both person A and person B consider this transaction a gift, because such an expensive car is worth thousands more, and even though person B gives him £1, that pound is nothing and therefore this surely is a gift. That is what the intention of both parties is. And if person B was to later remind person A of him selling the car, person A would probably laugh at him. As far as he is concerned, he gave him a gift and it was not a sale. Despite all this, they would both be wrong. The Shari’ah actually considers this a sale. There is no doubt amongst the scholars that this is a sale, because the pound was a requirement in the contract. So it is a mistake to say that intention always matters.

Similarly, even though both parties in the student finance ‘loan’ think that a loan is being taken, they are mistaken as per the Shari’ah. They may well be right according to Student Finance regulations, but according to Islamic Law they are not correct. Rather, the conditions of a loan have not been fulfilled in the Shari’ah and so it is not a loan, even if their intention was otherwise.

Q4: Some people say the loans are haram, and now I have read this. What do I do?

A4: I explained above why the UK scholars are more worthy of being followed on matters that pertain to the UK Muslim community. Similarly, the European Council for Fatwa and Research is one of the more worthy fatwa councils of being followed than others in this case for the following reasons:

  1. Its members are from the great jurists of the world, such as Shaykh Yusuf al-Qardhawi
  2. Many of its members are from the UK or have lived here for a long time, all of whom have vast experience in Islamic Law.
  3. It is a large body with many members, and whenever more scholars agree on a particular matter, it is more likely to be correct.
  4. They work very hard in studying the circumstances of the Muslims in the UK, and understanding the reality of what the Muslim community goes through.

It is natural that some people say it is harām to take this loan. Opinions will always vary, and people tend to be extra cautious when it comes to transactions they are not so familiar with. However, we have a great number of scholars who have looked into the matter in depth, and have ruled that it is permissible for a Muslim to do so.

I end with another important point to keep in mind: there should not exist the glorification of harām which is common amongst young Muslims. They think that the more you believe something to be harām, the more pious you are. This is a grave error. As the great Imām Sufyan al-Thawri said: ‘true knowledge is a concession given by a trustworthy scholar. As for strictness, then that is something everyone can do.’[12] Making the permissible harāis just as grave as making the prohibited alāl. The truth is that which was revealed by Allāh Almighty. If it is permissible, then that is the truth, and if it is impermissible, then that is the truth.

Q5: But this is such a big harm to the Muslim community. Students leave university with so much debt. So how can it be made permissible?

A5: That is where you are indeed incorrect. The exact opposite is true. The whole reason this fatwa is being pushed and spread is exactly because of its great benefit to the Muslims. If it was a harm, then even those who believed it to be permissible would remain silent. The student loan is a great benefit to the UK Muslim community, because students are not falling into riba as we stated above, and very rarely do they pay back the full amount unless they earn very large amounts of money. Those who do not earn £21,000 are immediately out of the question. They will not pay back a penny. Those who earn this amount, will pay some money, but will never pay back the full amount, because by the time they get anywhere near the £40k or sometimes £80k that they ‘owe’, the 25 or 30 years will have passed and anything remaining will be waived. Even the high earning jobs are unlikely to pay back the full amount, because graduates usually start off on £16k or maybe £20k if they are fortunate, and this only gradually goes up, and once again by the time they come close to paying it all off, the ‘loan’ will be written off by that time. This can often be the case, even for doctors who earn £50k or £60k, because medical students usually will have taken out a ‘loan’ of £70,000 altogether, which then rises quickly and may reach as high as £100,000. Once again, by the time they reach the £70k of ‘re-payment’, the 30 years will likely be up. Most graduates have not even thought about this ‘dept’ that they are in because they are not affected by it. So there certainly is no harm to the Muslim community at all.

The student finance loan also has made life so much easier for Muslim students because they have not had to worry about working while studying or borrowing huge amounts of money. All this is assuming that the student only takes out a loan for his undergraduate studies. If he was to take further loans for an MA and a PhD, then this is even more clearly distant from paying back anything. If we assumed this to be an interest loan, then a tiny minority of students will pay back the full loan, which means that there is still a huge benefit for the community. So the fact that we have shown that this does not qualify as a loan at all means that this indeed is a major benefit for us.

Qadi Abu Ya’la al-Hanbali (r) related in his book ‘Al-Uddah’ that Imam Ahmad (may Allah be pleased with him) was asked a question about something he considered prohibited. Rather than answering the questioner with his own opinion, he directed him to another scholar who considered it permissible. Imam Ahmad (r) wanted ease for the questioner even though he himself believed the action to be prohibited, and this was the practice of many of the pious salaf. So it is not from the practice of the salaf to want to make things haram unless they really had to; not to rush into making things prohibited, which unfortunately is the practice of some unqualified youth today. It does not mean that we follow our desires in making the haram halal, but at the same time, we should want ease for the people and follow in the footsteps of the righteous scholars.

And Alhamdulillah firstly and lastly

Source: www.islam21c.com

Notes:

[1] The reasoning used by some other scholars for saying that the ‘loan’ is permissible differs from the one mentioned here. Nonetheless, the conclusion is the same. Indeed the various reasons for proving the permissibility is a way of strengthening this opinion, and Allāh knows best. Their evidences and reasoning will be mentioned in full in a later writing that I ask Allāh to make easy. I have left them out here to keep things concise.

[2] The European Council for Fatwa and Research is a large body of scholars and jurists from across Europe and the world. They come together to give rulings and answer questions that are of concern to the Muslims in Europe and the West. The committee is headed by the honourable jurist of our time, ‘Allaamah Shaykh Yusuf al-Qardhawi, one of the leading scholars of the world today. Its members include: Shaykh Dr. Issam al-Bashir, Shaykh Dr. Suhaib Hasan, Shaykh Dr. Salman al-Odah, Shaykh Hussain Halawa, Shaykh Dr. Abdullah al-Judai’ and Shaykh Salem al-Sheikhi, as well as others.

[3] See Mughni al-Muhtaaj (2/117)

[4] See Sharh Muntaha al-Iradaat by Imam al-Buhooti (3/563)

[5] Al-Ijmaa’ (pg. 140)

[6] Surat al-Baqarah: 275

[7] See al-Mughni by ibn Qudamah, chapter of transactions.

[8] Al-Qur’ān, 10:59

[9] Al-Qur’ān, 4:83

[10] ‘Liqaa al-Bab al-Maftooh’ from the fatawa of Sh. Ibn ‘Uthaymeen (20/32)

[11] See Tafseer al-Tabari and Tafseer ibn Kathir (explaining verse 93 of Surat al-Nisa)

[12] Jami’ Bayaan al-‘Ilm wa-Fadhlih, ibn Abdel Barr (Hadeeth 911)

About Zahed Fettah

Zahed completed his LLB Law degree from the University of Birmingham and has almost completed a BA in Sharī'ah Law from the European Institute of Human Sciences. He holds ijazahs in Fiqh and Hadith, with the focus of his studies being in Fiqh. He is currently a teacher of Arabic and Islamic Studies.

46 comments

  1. Jonathan Hernandez

    http://darulfiqh.com/are-student-loans-a-mudharabah-investment-contract/

    Very detailed reply establishing why student loans can not be considered mudharabah

  2. Keep throwing fataawas, making halal haram and haram halal.

    Under the guise of these scholars. The same lot who christened Erdogan as Mujaddid, who went on to facilitate Russia in the butchery of Halab.

    Ya Allah, save the noble ummah of your habeeb from the fitna of these people.

    Can’t call them scholars.

    • lol you lot crack me up. The same scholars that told you in the first place what Allah’s deen is (and what halal and haram is in the first place, and who Allah is and how to pray to him), when they say something your whims and desires don’t like, you reject them without any basis.
      أَرَأَيْتَ مَنِ اتَّخَذَ إِلَٰهَهُ هَوَاهُ أَفَأَنتَ تَكُونُ عَلَيْهِ وَكِيلًا
      “Have you seen the one who takes as his god his own desire? Then would you be responsible for him?”

      • Islam came to the Indian sub-continent mostly through Sufis. We can’t be glorifying them, even if they make mistakes. Take what is haq brother and refrain from bail.

        Jzk for providing the ayah, now apply to these lots who keep throwing so called fatwa.

  3. Can someone tell me about the ongoing interest that my student loan is accumulating every month?

  4. show and give us whats ours....if GOD is out of the equation...then for hunanity's sake

    Salaam alaikom

    When everybody comes back online….and before and if the meltdown comes…may anybody advise me how i could get back my money from the student loan company?

    Alhamdullah…it is only one hundred and fifty…well a little less….so alhamdullah…im blessed….ad to the word only…suppose that is only for now…as satan makes us fear poverty and future….even so….if only a penny….

    (If anybody answers-somebackground infornation…is…i earn/ed below the threshold….

    Also…alhamdullah al Razak enabled me to pay off all that i owed…fudl mn Allah…and definetly without the extra interest they say i owe….)

    As to what is in the brackets…..someone said…that i need not have paid it back….as alhamdullah as for me parents and myself ..while worked we paid our taxes….and istigifirAllah…as there us talk about taxman and what not….fearful…from worldy men…Allah forgive….can not prove all expenses…from charity…to along time ago and perhaps…continuing….exravagance and corruption that i may or may have not did or done…..

    Subhan Allah…seek refuge from i….used to …h well…never mind….only Allah judges in the end….may He purify the intentions within….used to give out freely and willingly…due to lack of knowledge and perhaps eman….something is not right….so give us what is ours not just mine but the peoples too….ee plead and advise you..please do so….

    Allah bless us all

    • wukala Allah fil al ard...where are we or what have we become? ie what are we all chasing?

      May Allah provide for all in need and use their blessings wisely..from the robbed third world to all impovershid peoples of the world….

      Dua of moses and even noah…peace be upon them and onto the rest of us…

  5. Subhanallah so many comments have been deleted on here. I posted one months back – vanished. Will screenshot this and make it into a new Dawahman video, stay tuned for revealing the truth.

  6. I’m sure someone will correct me if I am wrong (!), but is not the concept of riba based on the idea of exploitation? That is to say, an individual or insititution taking advantage of someone’s poverty by lending funds with a view to making a profit by charging interest, thus improving the lender’s situation to the further disadvantage of the borrower.

    If so, this surely does not apply to student loans. These were introduced as a means of funding tertiary education when it was decided that the costs should not be borne by all taxpayers, as was previously the case. There is no element of gratuitous profit as such, as any interest accruing will be more than offset by the administration costs and the deficit caused by loans that will never be – and are not required to be – repaid.

    To put it another way, do you see legions of professional financiers rushing to offer such loans? I think not! There are no fortunes to be made in providing temporary funding to students. Is it not more appropriate to regard the interest element as a necessary payment to help cover the administration of the student loan scheme? And, as a fair price for a provided service, therefore halal?

  7. What about the monthly interest which is not known at the time and subject to change that is added to the original amount ‘invested’ by the Student Finance.

    So when it comes to paying them back, you are not paying back on the original amount invested but on the accumulated amount.

  8. P.A.Mohamed Ameen

    THE CONCEPT OF INTEREST IN ISLAM:

    The concept of interest is one of the most complicated in Islam.
    The Prophet received the revelation condemning riba only a few days
    before his Wafat and so the companions had no opportunity to ask
    Rasulullah (SAW) for the fullest implications of the order. Even
    Sayyidina Umar ibn al-Khattab had said,

    “The last revelation of the Quran was concerning riba and the Apostle
    of Allah passed away before explaining the full meaning of the passage to us” ( Ibn Hanbal, on the authority of Said ibn al-Musayyab).

    The exploitation of the economically weak by the strong is a form of
    oppression. Hence, attaching profits (riba) on the personal loans
    obtained by those who are really poor, downtrodden and debt-laden is a disgrace and is condemned as haram by Islam. There can never be two conflicting opinions on this.

    But not all interest-bearing financial transactions fall within this
    category of exploitation by the economically strong. Life assurance
    and buying houses on mortgage are two examples of contractual
    financial transactions which fall outside this category of
    exploitation.

    ” the question as to what kinds of
    financial transactions fall within the category of riba is, in the
    last resort, a moral one”.

    It is impossible to give an outright judgment in a non-Muslim country
    banning on all kinds of interest-bearing financial transactions, in a
    rigid and once-for-all manner putting the economically weak Muslim
    minority in the UK at a greater economic disadvantage.

    The interpretation of Islamic scholars must not ignore the changes to
    man’s environment on his social, economic and technological
    development.

    That is the adoring beauty of the Quran. It is Islam’s biggest
    miracle. People living the third millennium may read the same Quran
    without an alphabet having been changed, but will see totally new
    light, new messages, new interpretations and new discoveries that go
    beautifully and logically cognizant of the socio-economic-
    technological environment of that time that we people living in the
    second millennium never ever dreamt of. Hence my simple assertion is that, our traditional Alims should not apply the first century Hijrah
    definition of Riba to solve the most complicated economic problems of the 21st century.

    One other point that is worth mentioning here is that, during the time
    of the Prophet(SAW) the value of money was constant and inflation was non-existent and hence Riba ( as the sort practised by Abbas-RAA )was haram because the lender even after a year of waiting will get the money that he lent whose purchasing power had not diminished at all.

  9. P.A.Mohamed Ameen

    I am sure Islamic principles can not be as rigid as our conservative
    scholars expect us to believe.

    Please bear in mind that Muslim minorities in non muslim nations
    are not governed by Wilayat-al-fiqih, but are governed by compromising secular laws, hence we can not apply Islamic jurisprudence in their finest details in Toto.

    The basic question to be addressed is:

    “Do the secular laws of India undermine the basic beliefs of Muslim
    minorities?”

    In accordance with the opinions of world renounced Imams like Sheikh Qartawi ,Tantawi and many others, Muslim minorities ought to live by the laws of the country where they live, as long as the laws allow Muslims to adhere to the basic Rukun Islam.

    This has been the position of millions of Muslims living in the U.S.A., U.K., France, Germany, Canada, Netherlands, Australia and in some of the Asian countries like China, Philippines, Thailand, Cambodia, Sri Lanka, Singapore etc

    STRICT ADHERENCE TO ISLAMIC LAWS IN SECULAR INDIA

    If our Sunnat Jamah Alims do not agree with the above line of
    argument, how would they justify, the entire Muslim population of
    India obeying and following several sections of the Indian penal code
    which are secular and in very many parts derail the secondary line of
    Shariah laws.

  10. P.A.Mohamed Ameen

    Buying capital ( durable ) goods based on Islamic finance and conventional finance

    Conventional Finance

    A Muslim goes to buy an automobile (car) .The cash price is US $10,000

    The Car dealer tells the buyer as follows:

    Based on Hire Purchase

    Cash price $10,000 add 10% interest for five years
    That is $5,000

    So the total payable is $15,000 over a period of 60 months (five years)

    The prospective buyer should pay a monthly instalment of $250 a month for five years and only then legally he owns the car, until then he is a hirer.

    Muslim Alims say this method is HARAM as it involves interest. FAIR. enough

    Let us look at the same example as followed by Islamic finance

    Officer at the car company financed by the Islamic way tells the buyer as follows

    We do not charge interest ( Riba) , Ours is a buying and selling contract.

    We sell the car to you right away and you own the car right away,

    But the price is US$ 16,200 ( same car, same model as in the above example) and we give you an opportunity to pay this price of the car over a period of five years.

    Divide this $16,200 by 60 months to find out how much the buyer repays a month

    It works out to be $270 (16,200 divided by 60)

    The Alims argue that this is NOT HARAM because the buyer buys the car outright

    Being a small economist I understand the difference , In the conventional method the buyer hires the car but in the Islamic method the buyer buys it outright and agrees to pay by instalments

    My argument is that it is the difference in terms used. In Islamic method the increased price ($ 6,200) is profit .

    But in conventional finance it is termed interest (riba)

    Let me wait for members to study the examples and comment

    • You haven’t given any evidence for any of your claims or fatwas?
      You can sugar coat it and use any words to describe it. The reasoning behind a student loan and it’s conditions are not even c!ose to a mortgage. If you die your family still have to pay the mortgage! That’s exploitative riba and oprresses the next generation who did not even take the mortgage!
      A student loan is nothing like that.
      This is a scholarly debate and not for laymen to give it 2pence worth and derive there own rulings.
      The Sheikh is qualified enough to give fatwa. We are not!

  11. Untrained layman

    Seems like an attempt to reconcile a vexing problem with a less than ideal solution. Appropriate response should be to find ways to mitigate and minimize school costs, not rewrite or restrict definitions in dhahiri-like fashion to create technicality-based legal evasions.

    I don’t doubt the sincerity of our respected scholars, but our attempts at reconciling modern-day finance with Islamic transaction law is leaving all of us at a net loss. Instead of recommending we cast our nets the day before the Sabbath in order to avoid technically working on it, perhaps we should push harder on pointing out this is riba and finding proper solutions.

    And btw, this isn’t a novel issue. If all this time, the fatwa has been “haraam” and it is now switched to “halal” after further investigation, one must wonder what level of scrutiny and investigation occurred regarding the initial rulings passed. As well as other rulings.

    • That is remarkably simplistic. Firstly, it is not the matter of something ‘haram’ suddenly becoming ‘halal’.

      Secondly, despite that, this fatwa HAS come at the end of an exhaustive push by a number of scholars and key players to find another alternative to the current model; not because the current model is haram but it (as you can see from the comments by some overzealous laymen) is unnecessarily convoluted and lends itself to lay people being put off (for instance at the incidental usage of the word “interest” that many misunderstand to mean riba).

  12. Few responses to some of the concerns above, based on my understanding of the fatwa of the shaykh:

    1. Does the shaykh hold the view above? The shaykh read this article a few days before being published and he approved of it to me verbally. So this most certainly is his current opinion.

    2. Does the intention affect the contract? If A says to B: here is a gift. Just give me a fiver, and that is it. Whether they both intended a sale or not, this is a sale. Even if their intention is a gift. The same applies here for the student finance contract. It fulfills the conditions of mudharabah, so that is what it is, even if they both think it a loan. Because the conditions for a loan are not ticked.

    3. Shaykh Haitham studied fiqh for over 20 years with major jurists of the world. So it makes no sense that you think he missed a verse in the Quran or a hadith that talks about riba being haraam. If it is clear to the layman, then it is even clearer to the scholar.

    • Please could you provide evidence that the European council for Fatwa and Research holds this view as there is no evidence for this online or any sites?

  13. I literally cannot believe how many people commenting here and on social media are really unable to get it into their skulls that interest is not the same thing as riba. You can quote ayat about riba all day and try and substitute ‘riba’ for ‘interest’ but it’s not going to change what it is. Stop playing by non-Islamic definitions of words and step outside of that bubble.

    • Surely the most important lesson is this: It is perfectly possible for highly intelligent, meticulous, and sincere scholars to examine the same source material over the same issue and come to diametrically opposed solutions.
      We would all do well to learn this lesson and learn to respect others with different views. Too often these valid but opposing views are the source of discord, and in extreme cases lead to violence and war. I could list many many examples, but I would ask people of faith this question. Do you really believe that a omniscient deity would decide which people should burn in hell, and which people would go to paradise, based on which of two equally valid interpretations they decide to follow?

    • What is the English word for Riba? What is interest? What are the differences between Riba and interest.

    • So can you tell us what is riba then?

  14. BismAllah Ar-Rahman Ar-Raheem

    Sallam alaikom
    Can I just add the below if I may?
    On the authority Abi Ab’dillahi al-Nu’man ibn Basheer (ra) who said: I heard the Messenger of Allah (peace be upon him) say: “That which is lawful is clear and that which is unlawful is clear and between the two of them are doubtful [or ambiguous] matters about which not many people are knowledgeable. Thus, he who avoids these doubtful matters certainly clears himself in regard to his religion and his honor. But he who falls into the doubtful matters falls into that which is unlawful like the shepherd who pastures around a sanctuary, all but grazing therein. Verily every king has a sanctuary and Allah’s sanctuary is His prohibition. In the body there is a morsel of flesh which, if it be sound, all the body is sound and which, if it be diseased, all the body is diseased. This part of the body is the heart”.

    [Related by al-Bukhari and Muslim]

    Perhaps it is to do with what was said perhaps not! It is a shame, whether it is interest or not, but my personal conviction is that it reminds me of the following hadith that states that the prophet (PBUH) said: “ There will certainly come a time when everyone will take Riba and if he does not do so, its dust will reach him”
    May I also ask the scholars whether they have considered all that was said above has been taken into consideration, when planning ahead, which seems just round the corner and Allah knows best, but when the cashless society comes into being…etc? i.e with ownership and all the other kind of transactions that are out there.
    I would like to add also if I may, but we are all straw men in this caged world, i.e. we are all commodities from when we all have a birth certificate assigned to us and the more we owe is the more we are worth to those we are indebted to! With that just said. Perhaps that is wrong information, there fore would brother Zahed as you studied law be able to shed light on that stuff, i.e. what common law and freeman on the land has got to do with all this if any?
    A scholar here in the UK did suggest and advise me to pay off the loan but to make sure without the interest (whether it is or not according to what is being said here, just stating a verdict I obtained). So I personally have done that, and I earn less then threshold currently, al-Hamdullah, just not to get myself dusty…etc. so that perhaps I can make more steps towards having my duas accepted in-sha-Allah, i.e. food, drink and clothing being from undoutbfall Halal sources. I understand that there are issues to if and when someone earns above the threshold! With that said, I had a dispute at work regards pay…etc. which led to the Student Loan company taking a some of money out of my following wage, due to taxable gross being high.  `Abdullah bin Mas`ud (May Allah be pleased with him) reported: “The Messenger of Allah (PBUH) cursed the one who accepts Ar-Riba (the usury) and the one who pays it.” (Muslim Hadith no. 1615)

    As to if I did start to earn above the threshold or anybody else …etc. would anybody be able to suggest what could be done apart from traversing the expansive lands, as to not burn ones hand form the coal?

    With out disrespecting the author or any of the scholar’s verdict he referred to and please correct me but that is the fatwa of my heart after just looking into the subject at hand, after seeing the many verdicts out thereI Because really I pray I am not amongst the ones Allah and the son of Mary (If we live to then) declare war on! Allah al-mustaan. And ultimately, we are all individually judged.

    Peace unto our blessed Ummah and those who follow the guidance of our Lord the One and only Allah.

    • Apologies i did not intend to lie…i mentioned that slc took out deductions of my wages…that was not then…but i am all confused…it seems and if im correct they are doing so now or aiming to do…Allah al mustaan…

      If by any chance anybody reads this…. please offer some help and advise…..because i myself like us all have many problems too….willing to pay for your time and any help offered…..if anything please remember me after yourself and the ummah and humanity in your duas….

      May Allah provide snd protect us all.ameen.

      And forgive us our sins.ameen

      Peace and blessings on the Beloved of Allah

  15. I Have read the article and have to say the author has a very poor understanding of reality and the Shara. To call the student loan as equivalent to mudarabah is breathtakingly misquided-there is no resemblance except in the mind of the author.

    The agreement in the student loan is clearly not to do trade whereby the worker uses his labour while the mudaarib finances the project and the profit of the trade is shared. Where is the profit in the student loan agreement and where is the agreement to do trading? Student finance is paying your fees and you agree to pay back that amount and an agreed amount of interest on that amount-how is that sharing profit???? Whether this is paid back via PAYE or any other mechanism is irrelevant. What is relevant is the agreement between Student Finance and the student and what it is in reality-a payment on his/her behalf which is agreed to be paid back with interest.

    Therefore the student loan or whatever you wish to call it is still an interest based transaction.

    Allah has mentioned those who try to liken interest with trade:

    “Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like interest.” But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah . But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein.”

    • I literally cannot believe how many people commenting here and on social media are really unable to get it into their skulls that interest is not the same thing as riba. You can quote ayat about riba all day and try and substitute ‘riba’ for ‘interest’ but it’s not going to change what it is. Stop playing by non-Islamic definitions of words and step outside of that bubble.

    • As briefly stated in the article, what matters is the reality of the transaction, not what is in the heads of those taking part. If I give you a car as a gift, then say to you: ‘this is a gift, but I will only give you if you give me £1, because I need it for the bus fare’, then this is no longer a gift. I believe it is a gift, because £1 is nothing, and you also consider it a gift, because the quid is nothing. So even though we both view and intend this as a gift, the Shari’ah rules that it is a sale, even though sale did not cross the minds of either of us.

      So even if what is in the minds of the parties is one thing, this does not automatically mean the ruling applied will be based on that.

  16. The assessment and reasoning of the article’s author is inaccurate, although we believe he has a good intention. Please note that your understanding of how the student loans work is incorrect and this article could be misleading and harmful to the efforts of finding a Sharia compliant solution for student loans.

    I have been working with government for many years to find a Sharia compliant solution for this problem, and now we managed to structure a solution that was approved by the government and was accepted widely by the British Muslims. During that process I met different government departments and their legal teams, all of them say it is a pure interest-based loan and I explored in-depth how it works. The main point that this article is relying upon is that the conditions of interest-based loan are not fulfilled, this is wrong. Without going into details and Fiqhi reasoning, I just would like to mention that I met Shk Haitham and others after the structure that I developed was accepted and explained to them from a Fiqhi perspective in 2014 and Shk Haitham confirmed in that meeting that he will not be issuing this Fatwa again and he will withdraw it as his understanding of how student loans work was not correct after I explained it to him and others. So, to the author as a brother please do not try to justify something without exploring it further and check with the issuer of this Fatwa if he still stands by it before you defend it and rationalise it. Your article could be harmful to all the efforts that have been done so far to facilitate a Sharia compliant solution. Jazak Allah khair.

    • Yes it still stands, and Sh. Haitham strongly holds the view. I spoke directly to the Shaykh before writing the article, and again before posting it, and also after posting it. He certainly holds the view explained above.

    • When will this solution come into effect? At the moment my studies are on hold due to this problem.

  17. Inran1mahmood

    From first principles it seems to me (Allah knows best) that we can work through this issue logically.
    The objection to a loan is not to the loan per se but to the taking or paying of interest. Thus the taking or giving of interest if it exists in the transaction would seem to render it the transaction haram. The question really is whether the transaction provides for interest or not. And if it does whether the payment is truly interest or something else. It does not matter for these purposes whether the interest is withheld through deliberate avoidance or tragedy personal or financial. The transaction would offend in any case. Equally whether the interest is in fact demanded or not cannot affect the nature of the transaction. If the agreement renders interest payable that would be enough to make the transaction impermissible.
    The next question is whether the consideration for the loan is truly interest or something else. If the transaction was in truth an investment the likelihood is that the return would be fixed to performance/profit and be measured against performance/profit. In that instance one would usually expect to see a return measured say as a percentage of earnings. In a typical tudent loan that doesn’t appear to be the case.
    In my view the loan is best described as a contract in which certain conditions trigger the payment of interest. The contract viewed objectively must therefore be haram whenever interest is triggered. However since it is people rather than contracts that are punished for haram acts it’s important to examine the consequences for the contracting parties. If you enter a contract knowing that interest is payable on certain trigger events you enter a contract to do something haram on those events. If interest becomes payable and you refuse to honour the contract that in itself would probably be haram for different reasons given the importance that Islam gives to cheating in business arrangements. If you entered a contract knowing that interest would not become payable because for instance you had no intention of working for 25 years that fact would be discloseable. If having disclosed that fact the other party was nonetheless content to advance the loan it probably would not be an offending transaction since the conditions for paying interest would not be likely to arise. For the overwhelming majority however the contract would appear to offend against the principle regarding riba.
    I cannot see for my part how in good conscience I could say that it was not a contract for a loan on interest.
    I should add that the fact that the sums are paid to the school and not the individual does not affect the quality of the loan. All that does is secure the purpose of the advance and is fairly common as another commenter said. You can see this in operation with mortgages and car loans everywhere.
    As I say Allah hu Alim. I’m not a scholar just a lawyer. I do not give rulings in matters of fiqh. This is just my layman’a analysis. I hope it helps. Allah forgive my mistakes.

  18. There are many issues with this article and indeed the ‘fatwa’ of Sheikh Haytham, for all those who have read it, see: https://intellectualissuance.wordpress.com/2016/04/07/university-loans-revisited/

    • lol I remember reading that. My comment under it seems to have disappeared. Maybe you should send the author of that post this article since he fell down at the first hurdle—he obviously didn’t understand Sh HH’s fatwa since his whole article is based on the presumption that interest=riba in all cases.

      • Akhi, I wrote the article and have a history of who commented, each of which I have approved. Your name, nor a comment attributed to it has ever appeared on my log. If you wish to leave a comment, please do, and I will approve of it after having read it, otherwise, watch your tongue and please do not tell fibs.

        The Sheikh began by saying that just because a matter is called something, does not make it so. But the antithesis is also true. Just because you call something a matter, does not make it so. In this case, even if the contract was not called an interest based loan, it’s features and characteristics are clearly interest based. Just because one says otherwise does not make it so.

  19. Unfortunately there is a big error in this article/fatwa. You say the loan is never in ownership by the student which is false. I took out a student loan which was paid into my current account so I had full control of that money. I know of ppl who spent there their loan money on everything but there fees

    • It should be noted that whether or not the money lands in your position, the transaction is still a mudaarabah transaction. I believe the author mentioned that the student loan is paid directly to the university simply to demonstrate how it is dissimilar to a traditional loan – but even if it was sent to you directly, it would still be considered a mudaarabah transaction.

  20. Jazak Allah khair. I see how it resembles a mudarabah contract, but what about the issue of offer and acceptance and both parties agreeing on the type of transaction? Does the contract need to be known to both parties as a business partnership rather than a loan?

    For example, can a Shia man marry a Sunni woman intending it to be a mutah (temporary pleasure) marriage yet acting as if it would be a standard Islamic marriage?

    In both examples, both parties don’t share a common understanding of the contract that they’re entering in, despite the outward resemblance.

  21. Fascinating and very informative reading. It provides a wonderful illustration of how words can be interpreted in order to arrive at a desired conclusion. In this case an interest bearing loan is not in fact an interesting bearing loan because:

    a) you cannot do with it as you wish. Does this mean a mortgage is fine, or a loan for a car?
    b) the loan is cancelled if you die or become disabled. Does this mean if you take out a loan with associated insurance (eg life insurance) this is fine?
    c) the loan is cancelled after 25 years or if you don’t earn enough to pay. The fact that something is cancelled in particular circumstances shoes not alter its nature if these circumstances do not apply. The fact that the original prohibition against interest bearing loans did not consider such a sceptical NW is therefore hardly relevant.

    Finally, although I understand the analogy with ginger beer, I should point out that ginger beer is called ginger beer because it is alcoholic, albeit not strongly.

    • You should try reading the article before commenting. You are using incidental consequences instead of the actual effective causes to draw analogies. Reductio ad absurdum.

      • Thanks Ibrahim. I’m did read the article but from your reply it seems you believe I misunderstood it? If so can you explain how please. You say that I am using ‘incidental consequences’ instead of the actual ‘effective causes’ to draw analogies. I am not sure if these phrases have particular meanings that I do not understand. If so I’d appreciate if f you would explain that to me as I had thought I had followed the exact reasoning of the author. I am familiar with reductio ad absurdum which is a technique first used by Greek philosophers such as Socrates and Aristotle.

    • Carl is a Troll who comes on here to add his ‘ haza wazak ‘ theories so he can then use it against Muslims and Islam in some way.
      He actually hates Islam and Muslims as is evident from his other posts and comments. He is islamophobic to the nth degree.
      In fact he just provides us with entertainment in his comments.

  22. This assumes that the money is transferred directly to the university. But I do remember from when I was at university that the student could apply for extra funds for him or herself. What about that?

    • “Although, if the maintenance loan can be avoided, it is preferred that one does not take it.”

      Nowadays the money is transferred directly to the university.

    • It should be noted that whether or not the money lands in your position, the transaction is still a mudaarabah transaction is not affected. I believe the author simply included that the student loan is paid directly to the university to demonstrate how it is dissimilar to a traditional loan – but even if it was sent to you directly, it would still be considered a mudaarabah transaction.

    • It should be noted that whether or not the money lands in your position, the transaction is still a mudaarabah transaction. I believe the author mentioned that the student loan is paid directly to the university simply to demonstrate how it is dissimilar to a traditional loan – but even if it was sent to you directly, it would still be considered a mudaarabah transaction.

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