Five commonly held misconceptions about Islamic finance
1. Islamic finance is only for Muslims
Al Rayan Bank is attracting customers of all faiths…in ever-increasing numbers. Last year more than 90% of new Fixed Term Deposit savings account customers were believed to be non-Muslim.
We believe this is for two main reasons:
Our ethical credentials.
With Al Rayan Bank, you know that your money will only ever be invested in ethical, Sharia compliant investments. These exclude all interest-bearing transactions and activities such as gambling, speculation, tobacco and alcohol. British consumers increasingly consider themselves to be ethical shoppers and therefore we believe many of our non-Muslim customers are attracted by our ethical approach to banking.
Our high rates of return.
Al Rayan Bank consistently delivers highly competitive expected rates of return for customers. But you don’t have to take our word for it. Moneyfacts – the UK’s leading independent financial data provider – compares all finance providers in the UK and in their 2018 awards named Al Rayan Bank as the UK's ‘Best Notice Account Provider', and highly commended us in the categories of ‘Best Savings Provider’, ‘Best Cash ISA Provider’ and ‘Best Fixed Term Account Provider'.
2. Savings accounts that pay an ‘expect profit rate’ are riskier than traditional savings accounts
Al Rayan Bank has always paid customers the expected profit rate and sometimes more.
Islamic banks pay profit to their savers rather than interest, as we believe that interest promotes unfairness in financial transactions and can lead to social inequality and injustice. Al Rayan Bank invests our customers’ deposits in ethical, Sharia compliant activities to generate a return, which is then shared with our customers.
Because this rate of a return cannot be guaranteed, it is referred to as an ‘expected profit rate’ rather than the ‘guaranteed’ interest rates conventional finance provides. However, we monitor our investments daily to ensure that the expected profit rate is achieved. In Al Rayan Bank’s 14-year history, the expected profit rate has been paid to all our customers – and sometimes even more, when our investments have performed better than expected.
3. Islamic Mortgage alternatives are much more expensive
Al Rayan Banks home finance products, such as Home Purchase Plans (HPPs), are competitively priced when compared to the market overall. We believe that our HPPs offer consumers an ethical, credible alternative to the conventional mortgage.
Our rental rates often place us in the mid-market and we offer customers a great overall package with attractive features that other conventional home finance providers may not be able to match. Examples could include the low administration fee we charge to customers which reflects the actual cost we incur; or the facility for our customers to make additional acquisition payments without charging large, arbitrary penalties; or the fact we do not charge for early settlement.
4. Islamic banks are not regulated
Islamic banks are regulated in the same way as other UK banks. All eligible deposits with Al Rayan Bank are protected by the Financial Services Compensation Scheme (FSCS). The FSCS provide savers with automatic protection of values up to £85,000, to protect you against your Bank, Building Society or Credit Union going out of business.
Al Rayan Bank is also regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
5. Al Rayan Bank is a foreign bank
Al Rayan Bank is a British Bank. In fact, Al Rayan Bank is the UK’s oldest and largest Sharia compliant bank and has played an active role in shaping the landscape of Islamic banking in the UK.
From becoming the country’s first ever wholly sharia-compliant retail bank in 2004, to working with the Government on Islamic finance initiatives, to issuing the world’s largest ever Sterling Sukuk for £250m, we’ve always pioneered British Islamic banking and financial inclusion – and we will continue to do so.