Sharia banking

What is a Sharia compliant account?

Although they are available to anyone, regardless of faith, Sharia-compliant savings accounts are designed to operate in a way that is consistent with Islamic law. With a Sharia-compliant savings account, rather than lending out your savings and charging interest then passing some of this on to you, the bank uses your money in a way that’s consistent with Islamic beliefs. This involves following an ethical code which forbids the bank from working with businesses involved in things which are against Islamic principles such as alcohol, tobacco and gambling. For this reason, Sharia-compliant savings accounts can be attractive to a broad range of people with ethical requirements, regardless of their faith.

Under Sharia (also known as “Shariah” or “Shari’a”) banking principles, earning ‘money from money’ in the form of interest is not permissible. Instead, savers share in the profits and losses of the bank. Rather than having interest rates, Sharia-compliant savings accounts have an ‘expected profit rate’.

How does the expected profit rate work?

An expected profit rate is an indication of how much you could earn when saving with a Sharia-compliant bank and in this respect, is different from an interest rate. The expected profit rate can reduce if the bank makes less profit than expected. If this happens, we’ll let you know the new profit rate and give you the option to either continue with the new, lower rate or to cancel your account early and to receive any profit earned up until that point.

How are deposits with Sharia compliant banks protected?

Sharia savings accounts have to comply with the UK banking regulations which require measures to be put in place to guarantee the safety of customer’s deposits. All of the Sharia-compliant accounts available via our marketplace are protected under the Financial Services Compensation Scheme up to a maximum of £85,000 per customer, per banking group.

Given that the expected profit on a Sharia compliant account is linked to the fortunes of the offering bank, it is theoretically possible that your account could make a loss. In this event, all of our Sharia-compliant partner banks operate a ‘make good’ policy to ensure that you always receive at least the amount of your original deposit if this were to happen.

For those for whom compliance with Sharia principles is important on the grounds of faith, it should be noted that the operation of the ‘make good’ policy is not Sharia compliant. You are therefore entitled to opt out of the make good policy and to instead accept the impact of any loss which may arise. To opt out, you should send a secure message through our website confirming your instruction.

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