Islamic banking could help reduce student debt drastically according to Liaquat Ali, founder an organisation aiming to reduce consumer debt.
Mr Ali, who heads the of Truly Interest Free project, will be speaking on the opportunities and benefits of interest free student loans at the UK's first Islamic Finance Conference later this month.
According to Mr Ali “it is simply a matter of rearranging how money flows through our lives”.
Using Islamic banking rules Mr Ali hopes to help point students in the direction of interest free loans, as banks are not allowed to charge interest under Shariah Law.
His organisation, Truly Interest Free, specifically aims to reduce consumer debt for families faced with charges related to college education.
Despite the Islamic finance has seen unprecedented growth over the past three decades, Dr. Mehmet Asutay, lecturer in political economy at Durham University believes that appealing to a non-Muslim market will be difficult.
He said: “Misconceptions about Islam in general prevent Islamic finance penetrating into larger non-Muslim communities. Therefore, a real effort has to be made by the Islamic finance industry to demonstrate that this is nothing more than ethical finance, as the ethical finance industry in the UK is growing.”
Dr. Asutay also stressed that inaccurate pre-assumptions about Shariah law need to be addressed in order for Islamic finance to appeal to a wider audience.
“A number of newspaper attempt to link Islamic finance with fundamentalism or radicalism and such attitudes do not help...linking Shariah law only to brutal criminal codes is a huge mistake.
“Despite such negativities, at least in the wholesale and fund management areas, British institutions including leading law companies are moving into Islamic finance. Thus, there is a huge potential for Islamic finance to develop in Britain and beyond.”
Earlier this year Lloyds TSB announced they would be offering suitable banking alternatives compliant with Islamic faith:
“Lloyds TSB offers an Islamic student account which is designed to meet the requirements of Islamic law. The account neither charges nor receives interest. The Islamic Student account has the approval of the Board of Islamic Scholars to ensure that it is Shariah compliant.”
Earlier this summer the National Union of Students compiled a report which showed over half of Scotland's students were taking on costly commercial debt in addition to student loans and bursaries.
Link: http://www.journal-online.co.uk/article/5939-islamic-finance-could-help-student-debt
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