Al Rayan Bank pays higher than expected profit rates to savers

22 July 2015

The Bank shares larger than anticipated returns with its On Demand, Direct Savings and Young Person Savings Account customers

Al Rayan Bank PLC has announced that it has paid a significantly higher than expected profit rate* to its On Demand, Direct Savings and Young Person Savings Account (YPSA) customers in June. This is because the investments that the Bank made with its customers’ deposits generated a larger return than predicted. Unlike conventional banking, where only the Bank would benefit in circumstances such as these, Islamic banking is modelled on partnership and both the benefit and risk of an investment are shared between the bank and its customers.

This is not the first time that Al Rayan Bank has shared a higher than expected profit with its customers. In both April and May 2015, the Bank paid more than double its expected profit rate to On Demand and YPSA customers, whilst Direct Savings customers were paid 73% more profit than expected in May. The Bank also paid higher than expected profit to On Demand Savings customers in March.

Al Rayan Bank is able to pay a higher than expected profit rate to its customers because Islamic savings accounts are based upon profit sharing agreements, rather than guaranteed rates of interest, meaning that when an investment does better than expected, the Bank and customer both benefit. Because expected profit rates cannot be guaranteed, there is a small element of risk involved. However, the risk is very closely managed, which is why since the Bank first began operating in 2004, it has always achieved at least the profit rate it expected at the outset for its customers.

If, for some reason, Al Rayan Bank was unable to achieve the expected profit rate it had quoted on a particular account, such as a Fixed Term Deposit, affected customers would be notified and given the option of either ending the agreement, with their original deposit and profit earned to date intact, or accepting a reduced “expected profit rate” moving forward.

Tim Sinclair, Senior Head of Marketing & Retail Sales at Al Rayan Bank PLC, said: “The better than expected profit rates that we have paid on several of our savings accounts in recent months provide an excellent example of how ethical, Sharia compliant banks differ from conventional banks. Instead of paying interest to our savers, we partner with them and invest their money in Sharia compliant businesses and ethical trading activities, sharing the risk and the reward.”

Al Rayan Bank has been a pioneer of British retail Islamic banking for over 10 years, and is dedicated to strong, faith-based ethics and great customer service. The first wholly Sharia compliant retail bank in the UK, it currently has over 60,000 retail, business and premier customers, and has earned a reputation for providing innovative products which appeal to people of any faith. This approach has helped it to achieve global recognition for its outstanding success** and maintain a long lasting reign over the best buy savings tables in the UK***. The Bank has also been recognised as an ethical alternative to conventional banks by the Move Your Money campaign and Ethical Consumer magazine, which places Al Rayan Bank in the top ten of ethical current account providers.

The Bank is completely transparent about where it invests its customers’ deposits, and, just as importantly, where it doesn’t invest them. Deposits are invested in asset backed, relatively secure assets such as property or metals. They are never invested in any activity that is not in keeping with the values of Islam – such as any activity connected to gambling, alcohol, pornography, arms, tobacco or any interest bearing activity – or any speculative activity.

As an independent UK bank, Al Rayan Bank is authorised by the Prudential Regulation Authority, regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is a member of Financial Services Compensation Scheme.

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*Al Rayan Bank offers an 'expected profit rate', which is generated by investing depositors’ funds in Sharia compliant and ethical trading activities. Al Rayan Bank has always achieved the expected profit rate offered to its customers.

**In May 2015, Al Rayan Bank PLC was named by Global Finance magazine as one of the best Islamic banks in the world, in its annual list of the World’s Best Islamic Financial Institutions. This is the second time that Al Rayan Bank has won the award, formerly winning under its previous name of Islamic Bank of Britain in 2009.

*** From Decemeber 2012 to July 2015, the Bank has consistently offered at least one savings account with the UK’s highest rate of return, according to the Moneyfacts and This Is Money best buy tables.

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