Sharia banking follows the laws and rules of Islam and is guided by Islamic economics, but it’s available to anyone. On this page, you’ll find out how Sharia banking works, what Sharia savings accounts are and why you may want to consider applying.

Quick guide

Earn profit

Similar to how other savings accounts list interest rates, Sharia savings accounts list how much profit you can earn through an expected profit rate (EPR).

You're in control

If the profit rate should decrease, we will contact you to ask if you want to continue with the new lower profit rate or withdraw your deposit and the profit you’ve accrued to date at the original rate.

Your deposit is secure

All of our partner banks offering Sharia savings accounts are fully regulated and provide peace of mind through deposit protection, and the ‘Make Good’ offer.

The rundown
  • Sharia banking is the same as Islamic banking, where banks adhere to Muslim principles and the teachings of the Koran 
  • You could consider Sharia banking to be a more ethical form of banking, because investing in restrictive practices is prohibited 
  • Anyone can apply for an account with a Sharia bank, regardless of religion

What does Sharia mean?

In order to fully understand Sharia banking, it’s important to first understand what Sharia is. Sharia is an Islamic law that acts as a code of conduct that all Muslims should adhere to. Following the teachings of the Koran, Sharia law aims to help Muslims understand how they should lead every aspect of their lives according to God’s wishes.

What is Sharia banking?

Sharia banking, also called Islamic banking, is banking that adheres to Islamic law. Some of the core principles include the following:

  • Not charging interest to borrow money 
  • Not paying interest on savings accounts
  • Not benefitting from restricted practices such as gambling, pornography, tobacco or alcohol 
  • Not engaging in high-risk investments or making deals that carry extreme uncertainty
  • Sharing profit and risk between banks and consumers 

As you can see from the graph below, Sharia banking is becoming increasingly popular, and is now available in many non-Muslim majority countries. In fact, the UK was the first western nation to issue a sovereign Sukuk (the Islamic alternative to conventional bonds).

How does Sharia banking work?

Sharia banks use your money in a way that follows Islamic law and beliefs. This means they don’t charge interest for debts (being in debt is not encouraged) and savers can’t earn interest from deposits in the traditional banking sense. The money you earn on your savings is from the profit the bank makes by investing your money in various projects.

Banks will ensure their accounts follow these teachings by appointing a supervisory board who will scrutinise the products before they are offered to customers.

Is Sharia banking more ethical?

You could consider Sharia banking as a type of ethical banking, as money invested in a Sharia bank cannot be used to fund businesses forbidden under Islamic law, such as alcohol, tobacco or gambling. This makes Sharia bank accounts a good choice if you’re looking for an ethical savings account.

How do Sharia banks make money?

Traditional banks typically profit from the buying and selling of approved goods and services. Islamic banks also use this form of trading to make money by investing in Sharia-compliant trade with the money deposited by their customers, sharing any profits made between them. 

Although they are prohibited from charging interest, known as Riba in Islamic terminology, Sharia banks can also make money by helping customers purchase property, using an Ijara or Murabaha scheme. 

An Ijara means you as a customer will technically lease property from the bank by paying rent. 

A Murabaha is where a property price above market value is agreed at the outset. The profit earned by the bank is deemed a reward for the risk taken on by the bank.

Can anyone apply for Sharia banking?

Yes, Sharia banking in the UK is open to anyone as long as you meet the eligibility criteria, as with applying for any savings account through our marketplace. You can find out more about our eligibility requirements in our FAQs.

Is Sharia-compliant banking right for me?

Using a Sharia-compliant bank in the UK could be right for you if:

  • You want to bank more ethically, and Sharia principles closely match your own
  • You are a Muslim who wants to bank according to Sharia law, and you want to be confident your bank uses your money in a way that’s true to your beliefs
  • You don’t want your money to be lent to companies that you would consider unethical, such as tobacco or gambling companies

What are Sharia savings accounts?

Sharia-compliant savings accounts offered by Islamic banks differ from regular savings accounts in that rather than paying interest, which is ‘riba’ and against Islamic law, you grow your savings by earning ‘profit’. This profit is earned through investments made into Sharia-compliant companies chosen by the bank.

Subsequently, Sharia savings account rates are advertised with an expected profit rate (EPR). It’s important to be aware that this profit rate isn’t guaranteed, but it’s highly unusual to receive less than the advertised EPR.  

Typically, anyone who’s eligible for other types of savings account can apply for Sharia savings accounts. There’s no need to follow Islamic law to apply. Sharia savings accounts tend to be highly competitive compared to other savings accounts, often featuring among the top savings account deals.

Do Sharia savings accounts comply with UK banking regulations?

UK banking regulations require banks to put measures in place that guarantee the safety of customers’ deposits. As a result, all deposits made into Sharia shavings accounts available through our marketplace are protected

In the unlikely event that a bank won’t be able to meet the advertised expected profit rate, we will contact you and give you the choice of continuing with the new lower expected profit rate or withdrawing your deposit and all profit you’ve earned to date at the original higher rate. This is to keep Sharia savings accounts in line with UK banking regulations, which stipulate that savings accounts must produce their advertised returns, mitigating any losses that might be made because of bad investment performance. 

By choosing to terminate your Sharia savings account due to a loss of profit, your savings account is no longer fully Sharia-compliant.

What is the ‘Make Good’ offer?

While browsing Sharia savings accounts available through our marketplace, you may have seen mention of a ‘Make Good’ offer. The ‘Make Good’ offer is specific to Sharia savings accounts and works on the principle that if a Sharia bank is unable to meet the advertised expected profit rate and your deposit returns a loss, the bank shall “make good” on any shortfall, meaning that you’ll receive your full deposit amount back.

Keep in mind that in the unlikely event that the expected profit rate drops below what was originally advertised, we will contact you to ask if you wish to continue at the lower rate of profit or if you wish to withdraw your deposit and any profit you’ve earned at the original higher rate to date.

By taking advantage of the ‘Make Good’ offer, your savings account will no longer be fully Sharia-compliant. You can opt-out of the ‘Make Good’ offer by contacting our Customer Services Team via service@raisin.co.uk with “Make Good opt-out” as the email subject.

Are deposits into Sharia accounts protected?

Yes, in addition to the ‘Make Good’ offer, Sharia-compliant savings accounts are protected in the same way as savings accounts offered by other regulated banks in the UK, meaning that your capital isn’t at risk. For example, deposits into savings accounts on our marketplace from UK Sharia-compliant banks are protected by the FSCS up to £85,000 per person, per banking group.

Why should I consider a Sharia savings account?

There are ethical benefits to opening a Sharia savings account that may be appealing to those of many faiths, as well as secular savers. This is particularly applicable if you have concerns over the types of businesses that a bank may be involved in. If you want to avoid funding businesses that might be involved in practices that go against Islamic law, then a Sharia-compliant savings account could be right for you. 

Opening and managing a Sharia savings account should feel familiar if you’ve opened any other type of savings account in the UK. Most of the processes are the same, but some of the terminology and ethics may be different.

How can I ensure my savings account is fully Sharia-compliant?

If you would like your Sharia savings account to fully comply with Sharia principles, you can choose to take a loss, and opt-out of the ‘Make Good’ offer. If you want to opt-out of the ‘Make Good’ offer, you can do so by sending an email to service@raisin.co.uk with “Make good opt-out” as the subject at any time, from the moment you open a savings account, up to 28 days before the maturity date.

Register to apply for competitive rate savings accounts

Register for a free Raisin UK Account to apply for competitive rate Sharia savings accounts online in a few clicks. It only takes a few minutes to register, after which you’ll gain access to exclusive savings accounts, rates, offers and bonuses.

Seven Sharia banking savings account myths – five busted and two confirmed

Whether you’re familiar with Sharia banking or want to check whether what you know is fact or fiction, in this article, we set the record straight by busting myths and clearing up some common misunderstandings about Sharia-compliant savings accounts.

Myth: Sharia savings accounts are only for followers of Islam

Verdict: False

Sharia savings accounts are available to everyone eligible for non-Sharia savings accounts. You don’t have to follow to Islam or follow Sharia rules to apply, people of all faiths can apply, including those who don’t follow any religion.

Myth: Sharia savings accounts don’t earn interest

Verdict: True

This is correct, instead of interest which is prohibited under Sharia law, Sharia savings accounts earn an expected profit rate. The expected profit rate works in a similar way to interest, in that you’ll receive a share of the profit the bank makes from your deposit amount.

Myth: There’s a risk you won’t earn the advertised profit rate with banks on Raisin UK

Verdict: False

If you apply for a fixed rate bond from a Sharia-compliant bank at Raisin UK, you’ll receive an expected profit rate rather than a fixed rate of interest. It’s unlikely you won’t receive the advertised expected profit rate (this has never happened to a Raisin UK customer), but if a Raisin UK partner bank is unable to meet the advertised expected profit rate, we’ll contact you and offer you one of two options:

  • Keep your savings account open and earn profit at the new expected profit rate.
  • Close your savings account early and move your deposit and the profit you’ve earned at the original rate to your Raisin UK Account. Once your money is available, you could use it to fund another savings account.

Myth: You could end up with less than you deposited

Verdict: False

The bank’s Make Good Policy covers every savings account offered by our Sharia-compliant banks. It ensures that regardless of unlikely changes to the expected profit rate, you’ll get your full deposit amount back. As you’ll see in the next myth, your deposit is also protected at all times by the FSCS.

Myth: Your money isn’t protected if the bank fails

Verdict: False

Every Sharia bank at Raisin UK is fully regulated in the UK, meaning that savings accounts deposits are protected by the FSCS up to £85,000 per person, per banking group.

Myth: Your money will only benefit the Islamic community

Verdict: False

As with depositing your savings at a non-Sharia bank, your money will contribute towards all sorts of opportunities that benefit various communities. Unlike non-Sharia banks, Sharia banks are prohibited from investing in businesses that provide gambling, alcohol, tobacco or explicit content, and banks such as Gatehouse are committed to environmental sustainability. Some argue that this makes Sharia banks an ethical way to grow your savings.

Myth: You could miss out on competitive rates by avoiding Sharia savings accounts

Verdict: True

Our partner banks all want to offer the best savings accounts rates that they can, and our Sharia-compliant partner banks often offer the best rates on our marketplace, which can be the best available in the market. By choosing to avoid Sharia savings accounts, you could miss out on a chunk of savings account growth.

Sharia savings accounts at Raisin UK

Below is a selection of fixed rate bonds currently available through our marketplace from our Sharia-compliant partner banks:

Rate Term Bank
1.40% AER 5 years Gatehouse Bank Find out more >
1.35% AER 3 years Gatehouse Bank Find out more >
1.25% AER 2 years Gatehouse Bank Find out more >
1.15% AER 1 year Gatehouse Bank Find out more >
0.90% AER 2 years QIB (UK) Find out more >

Grow your savings with a free Raisin UK Account

Our goal is to make growing your savings easier, and we achieve this by giving you the ability to apply for savings accounts from different banks in a few clicks. Register for a free Raisin UK Account to click to apply and gain access to exclusive savings accounts, rates and offers.

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