How does Islamic finance work?
As an Islamic bank, Al Rayan Bank's products exclude the use of interest, which is forbidden in Islam. Instead, Al Rayan Bank offers an expected profit rate for savings, and rental rates for home finance. But how does this work?
For savings, a customer places their deposit with Al Rayan Bank in return for an 'expected profit rate'. This is not a fixed rate of return, like interest, because the profit is generated through Sharia compliant investments. These carry an element of risk, but this is highly managed by Al Rayan Bank.
As a result, the Bank has always achieved the expected profit rate it offered, and sometimes customers have been paid more. Al Rayan Bank's Home Purchase Plans are based on co-ownership and leasing, through which the customer and the Bank buy the property jointly.
The customer's monthly payments gradually increase their share in the property, and include a rental payment on the share that the Bank owns. At the end of the finance term, the title in the property transfers to the customer and they own their home outright, without involving interest.
Banking you can believe in from Al Rayan Bank.