
How To Save For Hajj Quicker (Even If You’re Starting From 0)
05 June 2025 7 min read
Haider Saleem
5 min read
Last updated on:
Islamic savings account are one of the best ways to hold your money. You can put your hard-earned savings to work in an ethical way and usually generate better returns compared to accounts offered by the mainstream banks. They’re open to Muslim and non-Muslims.
In this article, we’ll talk about:
Islamic savings account are Sharia-compliant bank accounts. This is because your savings will not accumulate interest.
Islamic banks will grow your money through sharia-compliant investments (usually by giving the money out to people buying their homes).
Based on those returns the savings accounts offer an expected profit rate (EPR). The difference between interest and EPR is that the former must be paid, while the latter doesn’t. However, UK Islamic banks have always paid their EPR. They wouldn’t have a business or any credibility if they didn’t so there’s a very very low chance that will change.
Islamic banks will also not lend money to businesses that provide prohibited activities or services. For example, in alcohol, tobacco and gambling. Usually, Islamic banks will invest in commodities and property. They will also use the money to fund their Islamic mortgages.
Interest rates are at historic lows – not great for savers.
However, Islamic savings account are one of the best ways for you to hold your money.
Take this as an example: in 2019, Amir Firdaus, Chief Financial Officer for Al Rayan wrote in the Telegraph that 80% of all fixed-term deposit customers of Al Rayan bank are not of the Muslim faith.
This is because the top fixed savings products – whether they are one-, two- or three-year accounts, are all from Islamic banks [1].
But how on earth do Islamic banks pay much higher than other banks?
Well, the answer lies in the way banks get their hands on money. You see, banks make money by giving it out and then making a return on that. But to give money out you need to have money.
Conventional banks look for the cheapest possible place they can borrow money. This is the interbank market where you can borrow at as low as 0.25%. They borrow it for cheap and then sell it for higher. They can afford to give a mortgage out at 2% per annum and still make a tidy profit.
Islamic banks cannot borrow on the interbank market as that is an interest-based loan. So they are forced to look elsewhere. Enter the savings account.
Because Islamic banks are much more desperate to get your money – as it is their only option – they offer much higher rates to ensure you go with them. They then give that money out to Muslim home purchasers at around 3-4% and make a profit.
Islamic banks in the UK are regulated by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
Savers are also protected by the Financial Services Compensation Scheme (FSCS). This gives you a protection limit of £85,000 (or £170,000 for joint accounts) per authorised firm. Note though that some Islamic savings account do not offer joint accounts.
However, check yourself before you open an account and read the T&Cs to ensure you’re protected. You can also see which banks are authorised firms on the Bank of England website.
Also, ensure your money is protected by checking if you’re within your limit along with money held in your other bank. Some banks are part of the same authorised firm. Read more on the FSCA website.
As we mentioned, the difference between interest and EPR is that the former is guaranteed and must be paid, while the latter doesn’t.
However, UK Islamic banks have always paid their EPR and their business model would collapse if they ever fell short.
Islamic banks in the UK include Al Rayan Bank, Gatehouse Bank, Ahli United, BLME, Qatar Islamic Bank (QIB) and United Bank Limited (UBL) UK.
Let’s focus on the fixed-term deposit accounts for now. Below are the best offerings at the time of writing:
Term | Best option | EPR | Market Average |
One Year | Ahli United | 0.65% | 0.42% |
Two Years | QIB UK | 0.8% | 0.51% |
Three Years | BLME | 1% | 0.69% |
When shopping for an account, you need to look out for:
You need to consider which type of account to open. This will depend on how quickly you would like to access your money.
These types of accounts allow you to withdraw money earlier:
If you want quick access to your money or worried about an emergency, these accounts will not be suitable. You should consider an easy-access cash account.
If you are looking at investing your money directly, you should consider our platform Cur8 Capital. IslamicFinanceGuru provides access to Sharia-compliant, institutional-grade investments in Venture and Real Estate Capital through Cur8.
[1] Times
05 June 2025 7 min read
04 June 2025 4 min read