There has been debate among Islamic scholars and adherents about whether Muslim students can apply for the recently launched education loan in Nigeria, which is intended to support undergraduate students.
To clarify for everyone, including non-Muslims: “Halal” refers to something permissible, while “Haram” refers to something forbidden. In Islamic finance, riba (interest) is explicitly prohibited and considered unacceptable.
This brings us to an important question: is Nigeria’s student loan Halal or Haram for Muslim students?
Key Points About the Student Loan:
1) Interest-Free: The Nigerian Education Loan Fund (NELFUND) administers the student loan, and it is interest-free. From an Islamic perspective, the loan does not involve riba (interest).
In the Holy Quran, Surat Al-Baqarah (2:275) clearly distinguishes between “trade” and “interest (riba).” While trade is allowed, riba is forbidden.
Verse 276 of the same chapter further states: “Allah destroys interest and gives increase for charities. And Allah does not like every sinning disbeliever.” (See here for more)
Other chapters also condemn interest, including Surah Ali-Imran (3:130), Surah An-Nisa (4:161), and Surah Ar-Rum (30:39), among others.
2) No Application Fees: The application process for the student loan is free and can be done online, even via mobile phones. There is no requirement to pay before accessing the application link.
3) No Surety or Collateral: Applicants are not required to provide a surety to qualify for the loan, nor are they obligated to use their parents’ property as collateral. This is different from typical non-Islamic banking practices, where collateral is often required to secure a loan.
Is Nigeria’s Student Loan Halal?
Based on the information above, the Nigerian student loan is Halal. It complies with Islamic principles because there is no interest (riba) attached to the loan, and no collateral is required.
The term “loan” here does not imply that the borrower must pay interest. The only obligation is the repayment of the loan itself, which is clearly outlined in the terms and conditions (T&C). Applicants must take the time to read and agree to these T&Cs, which bind them to repay the loan, but without incurring interest (riba).
It is understandable that devout Muslims, whose lives are guided by the teachings of Prophet Muhammad (peace be upon Him), may be hesitant to take loans that involve interest. However, NELFUND’s student loan is free from interest.
Even in today’s financial world, the issue of interest remains debatable among scholars, especially when it comes to loans that can help improve one’s financial situation, such as a loan for education or housing.
The Holy Prophet warned against riba because, during his time, the wealthy often lent to the needy and charged interest, leading to resentment and animosity.
Many Islamic scholars today caution against taking loans to finance luxury items or unnecessary desires.
However, the purpose of the Nigerian student loan is to finance education, a path to personal growth and greater opportunities. Since the loan does not come with riba, it is even more permissible for Muslims.
Verdict:
The NELFUND loan is Halal. It has no interest, no surety, and no collateral requirements, making it permissible for Muslim students in Nigeria.
If you have a differing opinion, feel free to share your thoughts.
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