Islamic Bank of Britain launches savings bond paying 4%
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%.
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 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.
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
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