New £5m sharia-compliant social investment fund launches to reach more underserved social entrepreneurs in UK first
The Local Access Bradford Fund, said to be the UK’s first of its kind, will offer loans compliant with Islamic law, enabling it to reach those Muslim social entrepreneurs otherwise unable to take on social investment loans.
A new social investment fund, called the Local Access Bradford Fund, has been launched in Bradford to deliver sharia-compliant, zero-interest loans – a model that its creators believe can be replicated across the UK.
The fund is open to applications from people and organisations from all backgrounds in the Bradford area, but specifically aims to enable those Muslim social entrepreneurs that follow Islamic law to access social investment loans, which they wouldn't be able to otherwise because sharia law bans the use of interest.
The £5m fund is being delivered by Key Fund, through social enterprise and charity support programme Local Access Bradford District, and was developed with the support of Impact Hub Yorkshire.
Loans running between £25,000 and £250,000 will be available through the fund. The partnership says the fund offers the UK’s first sharia-compliant, zero-rate, social investment loans.
Local Access Bradford District was set up in 2022 with £6.6m of funding from Access (The Foundation for Social Investment) and Better Society Capital.
|
What is sharia-compliant finance? Sharia-compliant finance, or Islamic finance, follows Islamic religious laws (sharia law) by prohibiting interest (or “riba”) and involvement in sectors including forbidden (or “haram”) activities like gambling, alcohol, and tobacco. The practice is based on the belief that money should not have any value in and of itself, it is just a way to exchange goods and services that do have a value. As such, it should not be possible to simply make money from money. This means that paying or receiving interest is forbidden. Another core principle is that funds are invested in ventures and industries deemed socially responsible and banks or funders share both the profits and risks of transactions with consumers, rather than the bank bearing all the risk while receiving guaranteed interest. For repayable finance to be halal (permissible) for investors and beneficiaries, transparency and fairness must be evident throughout every stage of the investment process. In some cases, organisations may need to make fundamental changes to their operation so as to remain compliant, particularly around sharing cost of capital rates. |
Local Access Bradford Fund investees will pay a one-off fee up front to cover some sharia-compliant costs incurred by Key Fund, for example the time of the staff who assess the deals. Because interest is involved in other aspects of Key Fund’s work, those costs must be excluded from the deals made through the sharia-compliant fund.
Additional costs incurred to Key Fund are covered by grants from Access. Deals will be signed off by a mufti (an Islamic scholar qualified to issue opinions on sharia law) and the fund will be reviewed annually to ensure sharia compliance.
Addressing the UK social investment market’s struggles to serve black and minority ethnic entrepreneurs
Above: (left to right) Ashfaq Gulab and Kamran Rashid from Impact Hub Yorkshire with Dr Fraz Ali from Brilliant Healthy Smiles
The development of the fund was led by Kamran Rashid, chair of Local Access Bradford District and CEO of Impact Hub Yorkshire, following consultation with organisations and social enterprises most affected by financial exclusion.
In a statement, Rashid said: “[The fund’s] purpose is to remove the financial barriers to enable businesses to generate an income through doing good.”
A report published in 2024 by Social Enterprise UK found the UK social investment sector was making “slow and disappointing progress” in meeting the needs of social entrepreneurs from black and minority ethnic communities.
That report followed up on the 2022 Adebowale Commission, which found the UK social investment market had a “serious problem” with inclusion and equity and recommended comprehensive structural reform to better serve, in particular, black and minority ethnic communities and social enterprise leaders.
Matt Smith (pictured), CEO of Key Fund, said the organisation first tried to develop a sharia-compliant product 15 years ago, but has now been successful thanks to the partnership with Impact Hub Yorkshire.
Speaking to Pioneers Post, Smith said: “Key Fund all along has been focused on trying to ensure that capital flows to the most deprived, the most disadvantaged and most marginalised communities. There are communities in which we would want to support people where they couldn’t access social investment from us. So it was important that we invested time and effort in trying to make this work.”
A funding model which can be replicated across the UK
The new fund is advertised as open to all organisations, regardless of faith or background. However, to be sharia-compliant, the fund is not able to support any organisation involved in activities deemed “haram” (forbidden).
This means a social enterprise or charity making or selling alcohol, pork-related products or had any involvement with gambling wouldn’t be able to access the fund. But Smith emphasised that any application deemed ineligible on this basis would be supported to reapply to other funds delivered by Key Fund.
My aspiration is that we work with others to widen this as an offer
Smith explained that he hoped the product will prompt the wider UK social investment market to consider launching similar sharia-compliant products. In particular, he felt it would be important for sharia-compliant products to be delivered by organisations led by people from the Muslim community.
He said: “I believe that authenticity and transparency is really important in trying to build trust with marginalised communities. My aspiration is that we work with others to widen this as an offer. Perhaps there’s an organisation that takes this forward, using the model we’ve been able to build, but led by people from the community which the money is serving, because I think there's huge potential.”
Putting smiles on people’s faces
The first to secure a loan from the fund was Brilliant Healthy Smiles, a new social enterprise dental care initiative in Bradford led by Dr. Fraz Ali. The practice aims to provide accessible, affordable treatment by mirroring NHS pricing structures while maintaining long-term sustainability.
Dr. Ali said: “Navigating social investment initially felt like a minefield, but working with LABD partners like Impact Hub Yorkshire made the process streamlined, transparent, and supportive, even with dentistry being a niche market. This new lending product will help Brilliant Healthy Smiles give the people in our city access to the care they deserve.”
Top image: In May King Charles attended the launch of Impact Hub Yorkshire, which supported the development of the Local Access Bradford Fund (credit: Impact Hub Yorkshire)
| Ready to invest in independent, solutions-based journalism?
Our paying members get unrestricted access to all our content, while helping to sustain our journalism. Plus, we’re an independently owned social enterprise, so joining our mission means you’re investing in the social economy. |
