Shari’ah-Compliant Savings Accounts

Depositor Protection

Eligible deposits with UK institutions are protected by the Financial Services Compensation Scheme (FSCS) up to a maximum level of protection of £85,000 per person per institution. All new savings or bank accounts provided to UK customers are now covered by the FSCS.

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How does a Shari’ah-compliant savings account work?

In many ways, Shari’ah-compliant savings accounts work like any other standard savings account. However, unlike a standard account, a Shari’ah-compliant savings account pays an “expected profit rate” instead of interest.

This is because, according to Islamic law, paying and earning interest is forbidden, or haram.

The expected profit rate tells you the return you can expect to receive on your savings over one year and will be based on the profit the provider makes. Providers will generate profit by using money deposited into savings in a Shari’ah-compliant way.

While the profit rate isn’t completely guaranteed as it’s dependent on the profit the provider makes, most accounts will pay the advertised return.

You may find that Shari’ah-compliant accounts often feature near the top of our savings charts and offer a competitive return on your money.

There are easy access accounts and fixed-rate bonds that comply with Shari’ah law, as well as Individual Savings Accounts (ISAs).

What are the differences between Islamic banking and regular banking?

The key difference between a standard savings account and an Islamic savings account is that a standard account pays interest whereas an Islamic account pays an expected profit rate. Shari’ah savings accounts and standard savings accounts both display an annual equivalent rate (AER) to help you compare accounts and decide which ones to choose.

Islamic banks and standard banks also have different rules when it comes to how they use the money that savers deposit.

Standard savings providers may lend and invest money across a range of sectors to give savers a return on their money.

However, Shari’ah-compliant providers will only use money in a way that complies with Islamic law. For example, they will only invest into ethical, Shari’ah-compliant activities, such as property and metals, and won’t put their money into high-risk speculative schemes or sectors such as gambling, alcohol and tobacco.

These providers will typically have an advisory body that ensures all their activities are Shari’ah compliant.

Is a Shari’ah savings account secure?

Money in a Shari’ah savings account with a UK provider is as safe as money in other savings accounts.

Providers should be regulated by the Financial Conduct Authority (FCA) and the money you deposit with a provider (up to £85,000) is protected by the Financial Services Compensation Scheme (FSCS).

The FSCS will cover any losses up to this amount should the provider go bust, for example. Bear in mind that some providers share a banking licence, which means the £85,000 limit will apply to your total deposits across all these providers.

Can anyone open a Shari’ah savings account?

Anyone can open a Shari’ah savings account, regardless of their religious beliefs. Although they abide by Islamic laws and principles, these accounts are not restricted to Muslims and are open to all savers.

Because Shari’ah providers only invest in certain industries, savers looking for an ethical option for their money may be particularly interested in these accounts.

As with standard savings accounts, to open a Shari’ah savings account you will often need to be at least 18 years old, provide some form of ID (such as a driving licence) and deposit a minimum sum into the account.