27.08.2020 | 4 minutes estimated reading time | Print this article

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.

Register today


Image: @digitalshape via Twenty20

This article may contain information about partner banks, savings accounts, rates and bonus offers which were correct at the time of publication on 27th August 2020.