12.06.2018 | 4 minutes estimated reading time | Print this article

The growth of Sharia savings products in the UK

Not long ago, The Times stated that “Savers are missing out on some of the most competitive rates on the market because Sharia-compliant banks are being excluded from most best-buy tables”. We recently partnered with Gatehouse, a bank who offers Sharia-compliant and highly competitive savings products to UK savers through our marketplace, making this an ideal time to consider Sharia banking.

Sharia banks may be excluded from tables

Although they’re visible on some savings comparison websites, it’s been implied in the article mentioned above from The Times that Sharia banks have been excluded from some tables displaying savings products. This is potentially due to Sharia savings products not using interest rates, instead featuring an expected profit rate (EPR).

It’s arguable that some EPR savings products offer better value than interest-bearing savings products, but if they aren’t listed on tables, savers could miss out. At Raisin UK, we aim to provide you with the ability to view, purchase and manage competitive savings products, and this includes savings products featuring an EPR.

Sharia banks look set to become mainstream

In Specialist Banking, Charles Haresnape, the CEO at Gatehouse Bank, suggests that Sharia-compliant banking and financial services are going mainstream. He discusses the issue of Muslims finding it difficult to find Sharia-compliant financial services, stating that many end up with standard bank accounts, even though they don’t really want one.

In the article, Charles Haresnape also says that there has always been a degree of mystique about sharia-compliant banking and finance, but today this is becoming more acceptable. He goes on to say that what people find when they do some background reading is that sharia-compliant banking […] is not dissimilar to our own, but simply has a different structure and language – and principles that are ethical by default.

Speaking confidently about Sharia banking in The Times article mentioned earlier, Charles Haresnape says that Anecdotal evidence points to a shift among non-Muslims, who once would have gone straight to the high street banks. The competition will be felt by all banks, and that’s going to be good in the long run for savers.

What is Sharia banking?

Sharia banking, also known as Shariah, Shari’a or Islamic banking, and considered by some to be ethical banking, covers any financial activity that is Sharia-compliant. If you would like to know more, we recommend reading our Sharia banking page.

Can an EPR change?

EPR savings products work by distributing profit amongst all parties involved, and this means that the risk is shared too. It’s true that a resulting profit rate and alter from the advertised EPR, and in theory, an EPR can be lower than what was initially advertised. Sharia banks are forbidden from investing in industries such as those involved in gambling, alcohol, tobacco or arms, often opting to invest in property. This may be the reason that such savings products have yet to pay out less than the advertised EPR in the UK.

In the article mentioned above from The Times, Gatehouse says that in the unlikely event of the EPR changing, it will give customers the option to either keep their account at the new rate or close it and receive their capital alongside any profit that they’ve earned. It’s also worth noting that UK savers have the option to protect deposits of up to £85,000 through the Financial Services Compensation Scheme.

Combat static interest rates

As we won’t see an increase in interest rates this May and financial pundits such as This is Money has speculated that rates won’t rise from 0.5% until at least August, it’s important to be savvy with your savings, especially if you want to earn enough to beat inflation.

While it can be beneficial to take advantage of savings products offered by high-street banks, by considering the deals being offered by challenger and Sharia banks, you may discover a more profitable use for your savings.