How To Find A Sharia-Compliant Savings Account

Finding a Sharia-compliant savings account in the UK isn’t always easy. Most mainstream banks you’ll see on the high street (or even in online ads) don’t comply with Islamic law — so how can Muslims save in a way that upholds their values?

Finding a savings scheme that complies with your beliefs is important — so here’s the ultimate guide to finding a Sharia-compliant savings account in the UK.

What is a Sharia-compliant savings scheme?

A Sharia-compliant savings account allows Muslims to save money while complying with Islamic law. Islamic law prohibits certain financial ventures, like earning riba (interest) and investing in haram or makruh goods or activities. Learn why riba is haram in our Sharia savings FAQs.

Most mainstream banks and savings schemes in the UK work by investing your money in various schemes and businesses to generate more money. Some of this profit is passed onto customers as interest. Most of it is retained by the bank, who reinvest the money to continue the cycle. Customers have very little control over where and how this money is invested.

Sharia-compliant banking works in a different way. Sharia-compliant banks ensure that money is only invested in halal businesses to comply with Islamic law. They don’t offer interest rates to their savers — instead, they generate profit in other ways that comply with UK Islamic finance principles, and pass a certain amount of this profit to their customers. This is known as expected profit, or annual expected return (AER).

What’s the difference between ethical and Sharia-compliant savings?

Ethical savings accounts have some similarities to Sharia-compliant savings accounts, as they limit the types of investments that can be made.

However, not all ethical banks are Sharia-compliant. In fact, most ethical banks in the UK still offer interest on savings. They’re often designed for people who want to ensure they’re not investing in socially or environmentally harmful commodities, such as oil and tobacco. These aren’t necessarily haram, so it’s important to note the difference between ethical and Sharia-compliant savings schemes.

Which UK banks offer Sharia-compliant savings accounts?

There are currently 3 banks offering Sharia-compliant savings in the UK:

• Al Rayan Bank
• Bank of London & The Middle East (BLME)
• Gatehouse Bank

Each of these banks offers a range of savings accounts, including instant access, ISAs, and long-term savings accounts — so you can choose the one that works for you.

Other banks may also offer Sharia-compliant banking services. QIB UK offers financial services to high net worth individuals, while ADIB UK offers real estate financing in the UK.

Some of these banks also offer Sharia-compliant mortgages, which is ideal for Muslims considering buying a home.

Comparing Sharia-compliant savings accounts in the UK

All 3 banks are protected by the Financial Services Compensation Scheme, which should be the most important factor for any prospective saver. It means that your money is protected even if the bank goes out of business.

While Gatehouse Bank has the lowest annual expected return for long-term savings of the 3 banks, its relatively high Trustpilot reviews suggest their customer service is a little better than its rivals. So if you’re looking for a tried-and-trusted savings account, this may be the best option for you.

If you want higher expected profits, Al Rayan or BLME may be preferable. Longer fixed term savings accounts are also available with both banks if you want to maximise your AER. However, Al Rayan in particular has very mixed customer reviews — so it’s important to balance AER rates with customer experience expectations.

While BLME has the highest AER, it doesn’t offer ISAs or a savings app — so you’ll need to commit to web banking without the convenience of managing money from your mobile. If convenience is important to you, you’ll need to decide if the high expected profit rate is worth the lack of accessible banking.

Which Sharia savings account should you choose?

• Best for expected profit returns: BLME
• Best for customer experience: Gatehouse Bank
• Best for account selection: Al Rayan

Alternatives to savings accounts in the UK

While more and more people are choosing Sharia-compliant savings accounts to save money in the UK, there are alternative ways to save in line with Islamic law. Rotating savings clubs are extremely popular within Muslim communities in the UK and around the world, because they allow you save without worrying about riba, overdrafts, or making haram investments.

Find out more about setting up your own rotating savings club in the UK.