Fixed terms savings case study

Adam has lived in Oxford all of his life.  He was born there, went to school there and today lives there with his wife and two young children.

Unfortunately, both of Adam’s parents have passed away in the last couple of years and as an only child, the modest family inheritance has passed to him. Adam’s unsure of the best way to invest the money and so he has decided to put it into a savings account for a couple of years.

Adam’s had a current account with the same high street bank for most of his life; he has a mortgage with a large building society and a cash ISA savings account with another bank.   He reviews the fixed term savings accounts with these three providers, but is not particularly impressed with the rate of interest that they are offering.

Keen to ensure that he makes a decent return on his savings, Adam visits a savings comparison website to find out the current best rate of return on a two year fixed account.  He doesn’t immediately recognise any of the banks listed at the top of table, so decides to do a bit more research into the top three providers.

Upon investigation he learns that one of the three banks is in fact owned by a much larger high street bank which has been subject of a lot of recent criticism due to its involvement in various banking scandals. He dismisses this bank from his short list and focussed on the two remaining providers.

Both banks have strong credentials. One is a relatively new bank which appears to operate solely online; the other is Al Rayan Bank, formerly Islamic Bank of Britain (IBB). 

Adam is intrigued by Al Rayan Bank and does further research. He already knows that Islamic finance avoids the use of interest, but has no idea how customers make a return on their savings. He’s pleased to find out that Al Rayan Bank provides a return for savers by entering into a partnership with them, investing their deposits and sharing the resulting profit. He’s very impressed by the moral credentials of Islamic banking and finds the idea of his money only being invested in ethical activities appealing.

He’s also pleased to see that all of Al Rayan Bank’s savings accounts are covered by the Financial Services Compensation Scheme, the scheme which protects UK savers’ eligible deposits up to £85,000. Finally, he’s also reassured to learn that even though Al Rayan Bank can never guarantee the expected profit rate that it quotes, in its entire history it has never failed to pay the profit it expected to its customers.

He decides that an Al Rayan Bank 24 Month Fixed Terms Deposit is the best account for him and applies there and then; his online application takes just 15 minutes before it is accepted. Adam has asked for the profit he receives from his savings, which are paid to him every 3 months, to be reinvested alongside his original deposit and so this automatically takes place for the next two years.

After two years, Adam’s original deposit, plus the profit he has earned, is paid to him. He is pleased that he has made a decent return on his investment. He can now choose whether to invest in another savings account with Al Rayan Bank, invest with another provider or spend the money. He decides to spend the money…and who can blame him.

Adam is a fictional character, but his situation is one that is shared by a growing number of Al Rayan Bank’s customers. Al Rayan Bank’s products not only appeal to Muslims, but also to an increasing number of non-Muslims, who are drawn to the Bank because of its competitive products, great levels of customer service and the ethical nature of its approach to banking.