The Islamic finance industry has grown remarkably in recent years, and this growth hasn't been limited to traditionally Islamic countries. Islamic banks may offer UK savers competitive savings products, and by ignoring them, you could miss out.
The Raisin UK savings marketplace features Sharia-compliant financial products, but if you're not familiar with them, it's understandable that you might want to know more before making a deposit. We've put together a brief overview to aid you in making an informed decision about whether opening a Sharia savings product is right for you.
Sharia banking, also known as Shariah, Shari'a or Islamic banking, covers any financial activity that complies with Sharia law, reflecting the beliefs of Muslim communities that exploitative gains, also known as riba or usury, are prohibited.
Sharia banking ethics centre around the idea that money shouldn't be earned from money, essentially making interest rates a form of riba. You might question why you would open a savings product that doesn't allow you to earn interest, but although earning interest is prohibited, you can earn a profit.
Similar to how other savings products list interest rates, a Sharia savings product lists how much profit you can earn. Your capital isn't at risk, but the ethics behind how you earn a profit may be different to what you encounter at another bank.
In some instances, the amount of profit that you can expect to receive from a Sharia savings product can be greater than what you would expect to earn from an product that pays out interest. Opening and managing such a savings product should feel familiar if you've opened any other type of savings product. Most of the processes are the same, but some of the terminology and ethics may be different.
There are ethical benefits to opening a Sharia savings product 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.
Aside from deeming earning money from money as unethical, Sharia banking ethics emphasise helping individuals and communities, a practice which should appeal to all savers. Sharia-compliant savings products can be protected in the same way as other savings products, meaning that your capital isn't at risk. Sharia banks also reject financial approaches that are considered uncertain, such as those which rely on speculation or gambling.
Following recent unethical banking practice scandals, you may have concerns over the organisations that your bank has ties to. Sharia banks follow strict codes of ethical conduct, meaning that they are forbidden from working with any organisation involved in gambling, alcohol, tobacco or arms. Provided an organisation is considered ethical under Sharia banking ethics, a Sharia bank may work with them.
Yes, anyone can make a deposit into a Sharia savings product as long as you meet the eligibility criteria, as with applying for any savings product on the Raisin UK savings marketplace. You can find out more about our eligibility in our FAQs.
We work with a variety of partner banks to enable you to view, purchase and manage a range of savings products, including Sharia-compliant savings products because we believe that they provide value to UK savers.
After you register for your one single login, you can conveniently view, purchase and manage savings accounts with competitive interest rates in one place; the Raisin UK savings marketplace. Start making money on your savings today.