You are here: Home - Saving & Banking - News - Understanding -

A guide to Sharia savings accounts

0
Written by: Paloma Kubiak
16/10/2018
A number of Sharia savings products have upped their game in recent months, beating more familiar competitors to the top of the best buy tables. What are they and should you be tempted?

Under Islamic principles, savers are forbidden from earning interest or profit. Sharia-compliant products and accounts pay an expected or anticipated profit rate.

While this removes the element of certainty that an advertised rate will be paid on deposits, it allows the UK’s millions of Muslims to save without breaking Sharia law.

However, Sharia-compliant savings accounts aren’t just for Muslims – they’re available to all UK savers.

There are now several Islamic banks in the UK including BLME, Gatehouse Bank, and Al Rayan Bank, with many offering table-topping rates.

As well as top returns, they also appeal to the more ethical saver or investor as money is not used to fund businesses that engage in ‘unethical activities’ such as alcohol, tobacco, gambling or pornography.

Expected rate, not guaranteed: will they pay?

Unlike typical savings accounts, Sharia savings carry an element of risk as the rate is not guaranteed, it is expected. But to date, none of the providers have ever failed to pay out on the expected profit rate.

James Blower, managing director of Savings Guru, says: “I think the lack of guarantee is a reason why they’re not as popular as consumers are sceptical, but this is slowly changing.

“Sharia-compliant savings have developed their niche very well and will grow in popularity. As long as they continue to offer these rates and are accessible, savers will be tempted to try them out.”

High minimum investment levels but longer availability

Another feature of some Sharia-compliant products is their minimum deposit levels.

BLME requires an initial deposit of £10,000 for example, while Gatehouse and Al Rayan start at £1,000 minimum.

A plus-point of these higher-than-average minimum investment levels is that attractive rates are available for longer without being trampled by demand, unlike some mainstream savings deals that only last days.

Is your money protected?

If you’re tempted to go with an Islamic Bank, check whether your money will be protected under the  Financial Services Compensation Scheme (FSCS) which protects deposits up to £85,000 should anything go wrong.

Al Rayan, BLME and Gatehouse are all regulated by the Financial Conduct Authority (FCA) and are members of the FSCS.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week