Cascade Commentary

How do Sharia Compliant savings work?

March 2021

By Luke Roberts

Islamic finance is based on a belief that money shouldn’t have any value in itself and that you shouldn’t make money from money. It’s just a way to exchange products and services that do have a value.

With a Sharia-compliant savings account, it will not pay interest on your savings, but will instead pay a profit that’s generated from the savings deposits (The Expected Profit Rate).

Much like a ‘traditional’ bank, an Islamic bank invests the money you pay into your savings into Sharia-compliant ventures - this means money will not be lent to businesses that provide goods or services such as alcohol, tobacco or gambling, as these are all against Islamic principles. Then, the money that's made on the investments goes to the bank, and it then pays a profit share to its customers.

BLME state “as an Islamic bank, fairness, honesty, integrity and transparency are at the heart of everything we do. These values also shape how we treat our clients, employees and stakeholders. They forge our character and culture and are the building blocks upon which our reputation is built”.

Expected Profit Ratio

The Expected Profit Rate (EPR) describes the profit that the bank expects to make; it’s a target. The banks are required to advertise the EPR as a percentage so that you can gauge what the account offers in comparison to interest rates that you could receive or be charged by conventional banks. However, the rate is not guaranteed and could be adjusted at any time - although, at the time of writing, we have not heard of an instance where an EPR has been reduced or not met. 

Do I have to follow Islam to get an account? 

No - anyone can open an account with an Islamic bank, regardless of your religious beliefs.

Where to get a Sharia-compliant savings account

At the moment, these banks offer Sharia-compliant accounts to customers in the UK:

  • BLME (Bank of London & The Middle East)
  • Al Rayan Bank
  • QIB
  • UBL UK
  • Gatehouse Bank
  • Abu Dhabi Islamic Bank (ADIB) 

How secure are Sharia-compliant accounts?

Cash you put into UK banks or building societies (that are authorised and regulated by the Prudential Regulation Authority and Financial Conduct Authority) is protected by the Financial Services Compensation Scheme (FSCS). The FSCS savings protection limit is at present set at £85,000 per person or eligible entity per banking licence (and £170,000 for joint accounts). Savers that hold cash in Sharia compliant accounts offered by authorised and regulated UK banks and building societies are eligible for the same level of FSCS protections as non-Sharia compliant savings accounts.

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