Islamic Bank of Britain launches savings bond paying 4%

A market-leading savings bond from the Islamic Bank of Britain has smashed into the savings tables but you need to act fast if you want to benefit.
It’s pretty rare for a decent rate on a savings account to come along, but the Islamic Bank of Britain (IBB) has done just this with its new two-year fixed rate account paying 4%.
This impressive rate pushes it right into the top of the tables and it’s definitely worth considering if you’re looking for a new home for your savings.
The difference with this account, as opposed to offerings from the main high street banks, is that it adheres to Islamic, or Sharia, law. Because of this the 4% rate offered is not called ‘interest’ but is worded as ‘expected profit’.
In line with Islamic law, money deposited into this account is then invested in Sharia-compliant and ethical trading companies. However, to date the expected profit rate has always been paid on previous accounts so it works in pretty much the exact same way as earning interest on a standard account.
The account
The new account has been launched to coincide with Ramadan and is open to anyone. As this is such a good rate, it won’t be around for long and if you want to apply you have until the 19th August.
You can apply online and you’ll need a deposit of £1,000 to open an account. As it’s for a fixed term you can’t get your money out during the two years without facing a penalty. If you are likely to need your cash early, go for an account with a shorter duration, or even one with instant-access.
Sharia law
Traditional UK banks do not follow Sharia law, and typically have been off-limits to Muslims because of this. However, recently several banks have started offering Sharia-compliant products. It's important to remember that these accounts are open to people of all religions, not just Muslims.
The basic principle of Islamic banking is taken from Sharia – the religious law and moral code set out in the Qur'an. This is that Muslims can’t benefit from lending out or receiving money because money has no intrinsic value. Interest is therefore not allowed and wealth can only be made through legitimate trade and investment in assets.
Profit made through investment is then shared out between customers.
Best of the rest
The second best rate around for a fixed two-year account comes from the AA and pays 3.80%, with a smaller minimum deposit of £1. After this comes the account from Nationwide on the same rate, but this is only available to existing customers. Bank of London and The Middle East follows with an account paying 3.75%, but this has a hefty opening deposit of £25,000 so won't be suitable for most people.
Here are five of the best two year fixed rate accounts.
Top two year fixed rate accounts
Provider |
Account |
Interest Rate (Gross AER) |
Minimum Deposit |
Access |
IBB |
Sharia compliant fixed-term deposit |
4% |
£1,000 |
Online, phone, post |
AA |
Two-year fixed rate account |
3.80% |
£1 |
Post |
Nationwide |
Two-year fixed rate loyalty bond (existing customers only) |
3.80% |
£1 |
Post |
Two-year premier deposit account |
3.75% |
£25,000 |
Online |
|
BM Savings |
Two-year fixed rate |
3.65% |
£1 |
Post |
More on savings:
The best instant access savings account with no bonus
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Comments
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@ Arblaster; more people need to understand how paper money works. I love the foriegn news networks and crazy ex brokers, like Max who tell it as it is. Just a shame more people do not do their own research and just rely on Sky and the BBC for 'news'. Ps I love and adore religious people as they have morals and a mind which is open and free from the non sense of the worlds political influences. Ps @ skintsod, seen the news on the violence in Burma/ Myanmar by any chance? You may see the odd religious person fighting; to these religion is a political tool to kill! This is a shameful fact of the reality of Myanmar. Peace to all. Bring back the loving hippies any day
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Tanni, I can think immediately of two religions which do not promote violence against "non-believers": Judaism and Buddhism. Neither are proselytizing religions. If you're going to rant, try to keep at least some grip on the truth however inconvenient.
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So interest is money out of nothing? How does that happen? Magic out of thin air? All interest ultimately comes from investment in labour or physical assets, surely? [Not anti-Muslim, agnostic but tolerant!]
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10 August 2012