Islamic saving accounts.

[Deleted User]

allegro120 said:

[Deleted User] said:

Hello.
I've read that if you're a Muslim, then you can't technically  earn interest  but can make a profit payment. Is there really much difference  other than the termology used?
Also, can a non-muslim open an account with these banks?
Thanks 

Yes, anyone can open an account with Sharia compliant banks. You don't have to be a Muslim. 

In practice there is no difference between 'profit' and 'interest' except 'profit' is not covered by FSCS (capital is still covered).  I've had and still have a number of savings accounts with Sharia banks and never had any problems with them.  Also bear in mind that when you see advertised interest as EPR it is equivalent to 'gross', not AER, so the AER is slightly higher than the published rate.

OK thanks.

allegro120

masonic said:

allegro120 said:

In practice there is no difference between 'profit' and 'interest' except 'profit' is not covered by FSCS (capital is still covered).  I've had and still have a number of savings accounts with Sharia banks and never had any problems with them.  Also bear in mind that when you see advertised interest as EPR it is equivalent to 'gross', not AER, so the AER is slightly higher than the published rate.

Do you have an authoritative source for that? A Sharia bank is still obliged to pay you any profit that has accrued, so a claim against them under Part 15 FSMA 2000 would include this. The only difference in practice would be that for a fixed term account, where profit would cease at the point of failure, whereas for a conventional account you could elect to hold the account to maturity for full interest.

I can't remember where I got it from, it was few years back when I looked at it.  I've looked through few sources and concluded that FSCS protects capital, but can't guarantee profit.  My understanding of it was that accrued profit will be paid.