New research from Gatehouse Bank has revealed that, on average, Sharia'a-compliant accounts are beating the rest of the savings market, with 79% offering better returns than non-Islamic accounts. So, if you've been avoiding them because you're unsure of the expected profit rates they offer, you might want to think again.
In short, Sharia'a-compliant savings accounts follow Islamic law, which forbids interest, so instead the providers invest savers' deposits into ethical businesses and share out the profit. This is why the rate you can get on them is referred to as the expected profit rate, rather than a regular interest rate.
However, that doesn't mean you won't get the advertised rate. Because savings accounts in the UK (with the exception of stocks & shares ISAs) have to offer certainty, Sharia'a-compliant providers have to ensure they will be able to pay out the rate they advertise. So far, this has always happened, meaning they are a safe investment for the saver, with only the provider taking a risk.
Now, the data shows that they are not only a safe but also a sound investment, with the average rate of 1.54% among Sharia'a-compliant accounts (as of yesterday) easily surpassing the mainstream average of 1.29%. Indeed, Moneyfacts data shows that the average rates on Islamic accounts outperform non-Islamic averages in all sectors except easy access.
"Sharia'a-compliant institutions have to work harder to get the public's attention and offering better rates is one quick way to achieve this," Charles Haresnape, CEO of Gatehouse Bank, commented. "But, on a more fundamental level, what we're seeing is the emergence of a genuine challenge to the UK savings establishment.
"Sharia'a-compliant accounts are still relatively niche but this part of the market is growing significantly. Savers increasingly understand how they work, the ethical way they invest and, above all, the superior returns many offer."
To learn more about Sharia'a-compliant accounts, read our guide on the subject
Have a look at the savings charts to see what the best rates of the moment are, and you're bound to see some mentions of 'anticipated profit rate' among them