Alrayan Bank

Alrayan Bank (also written Al Rayan Bank) is a UK bank that operates entirely within Islamic finance principles. Founded in 2004, it has always paid the rate of profit it quoted to its customers, and on numerous occasions has paid more when its investments performed better than expected¹. It was previously known as Islamic Bank of Britain². Today it offers Sharia compliant savings accounts, an interest-free current account, and home finance in the form of Home Purchase Plans³.

The bank is open to everyone. Independent consumer guidance is clear that anyone can open an account with an Islamic bank, regardless of their religious beliefs⁴. What makes the bank different is not who can use it but how it works: it pays profit rather than interest on savings, it charges rent rather than interest on home finance, and it does not offer overdrafts, personal loans or credit cards at all.

What Alrayan Bank offers: Sharia compliant savings, current accounts and home finance

Alrayan Bank's range covers three main areas. Its savings products include instant access savings accounts, notice savings accounts and fixed term savings accounts³. Its Personal Current Account is an interest-free everyday account with a debit card and, subject to status, a cheque book¹⁰. And its home finance side is substantial: the bank describes itself as offering the UK's widest range of Sharia compliant home finance products, including property finance for landlords as well as home buyers⁸.

The common thread across everything it sells is that no interest is paid or charged anywhere in the business. On the savings side that means your money is placed into Sharia compliant activities and you receive a share of the profit those activities generate. On the home finance side it means the bank buys the property with you as a partner and you pay rent on the share you do not yet own. On the current account side it means the account pays you nothing and costs you nothing in interest, in either direction¹⁰.

The bank also applies ethical screening to where customers' money goes. It states that customers' money will never be invested in gambling, alcohol, arms, tobacco, pornography or any interest-bearing activities¹¹. This is a feature of Islamic finance generally rather than unique to Alrayan Bank, but it is a central part of what the bank sells, and independent consumer commentary has noted that Sharia compliant accounts appeal to savers looking for an ethical option as well as those whose faith requires it¹².

For more on each product type, see our guides to savings accounts, current accounts, ISAs and mortgages.

Profit instead of interest: how Alrayan Bank savings work

The core difference between an Alrayan Bank savings account and a conventional one is what your money does and what you get back. As the bank puts it:

AlRayan Bank, on its Fixed Term Deposit page¹³

In practice, the bank quotes you an expected profit rate rather than a guaranteed interest rate. The bank explains that savings products offer an expected profit rate, not a fixed rate, because with investment there is always an element of risk⁹. To manage that risk, the bank states that investments are monitored on a daily basis to ensure they will provide the expected profit rate that was quoted to the customer¹⁴. Its record since 2004 is that it has always paid the quoted rate, and on numerous occasions has paid more when investments performed better than expected¹.

Two further points are worth knowing. First, if the bank's activities ever generate more profit than needed to cover the quoted rate and its costs, the surplus does not go to the bank: once costs are recovered, any additional amount is donated to charity, with the donation approved by the bank's Sharia Supervisory Committee⁵. Second, the profit is not "interest by another name" in a structural sense either: the underlying activities are screened for Sharia compliance, so the source of the return differs from a conventional bank's lending¹¹.

For tax purposes, profit on savings is treated like any other savings income, and the same personal allowances apply. Our guide to personal tax explains how savings income is taxed.

Savings accounts: instant access, notice, Fixed Term Deposits and Cash ISAs

Alrayan Bank's savings range has three broad shapes, plus Cash ISAs³.

• Instant access accounts let you get at your money at any time, with the bank describing 24/7 access alongside profit rather than interest¹⁴.
• Notice accounts require you to tell the bank in advance before withdrawing, in the conventional way.
• Fixed Term Deposits (FTDs) tie your money up for a set period, in this case with an expected profit rate fixed for the term¹³.
• Cash ISAs hold savings within the ISA wrapper, so profit is free of UK income tax on those savings; see our ISAs guide.

A few practical rules apply across the range. New savings accounts can only be opened in a single name: applications are restricted to sole applicants and cannot be opened jointly¹⁵. The one exception is at maturity, where an existing joint Fixed Term Deposit can be reinvested into another joint FTD⁹. When applying, new customers need move-in dates for each applicant's home address covering the past three years, and a National Insurance number³.

At the end of a Fixed Term Deposit's term you can reinvest through Digital Banking, or the money comes back to you automatically: if you request a return, or simply do not respond before the maturity date, the funds are automatically returned to the nominated account you supplied¹⁶. There is also a small grace mechanism: if the expected profit rate increases after your maturity date but within 15 days of it, the higher rate is applied automatically¹⁷.

The bank issues profit certificates for savings accounts, which you can download from Digital Banking³. For a general explanation of how these account types compare, see our savings accounts guide.

Home Purchase Plans: buying a home in partnership with the bank

A Home Purchase Plan (HPP) is Alrayan Bank's alternative to a conventional mortgage, and it works on a genuinely different legal basis. Instead of lending you money, the bank buys the property with you, as partners, each owning a share. You then buy the bank's stake over time, paying rent on the portion you do not yet own, and own the property outright at the end of the agreement¹⁸. The structure is based on the Islamic finance principles of Diminishing Musharaka (diminishing partnership) and Ijara (leasing)¹⁹.

Although no interest is charged, the rental rate still has to be set somehow, and UK Islamic banks use conventional indices such as the Bank of England Base Rate to price their products, because these are widely recognised and allow a fair and consistent rate across the country¹⁹. Local property rental rates are deliberately not used, because they would create too much variation between one property and another²⁰. Once your deal completes, the rental rate is reviewed quarterly, in March, June, September and December, and any change to the monthly payment follows from those reviews²⁰. If the Bank of England Base Rate changes before your new deal completes, that change is applied immediately to the on-sale rental rate and your monthly payments are amended²⁰.

Existing HPP customers can switch to a new rental rate product. To be eligible you must be within 90 days of your current rental rate ending, or already on the bank's Standard Variable Rental Rate, and be up to date with your monthly payments; customers on the Standard Variable Rental Rate can contact the bank at any time to discuss available rates²¹. You can also make additional payments towards buying out the bank's stake, known as acquisition of share payments, though these are not permitted during a fixed rental rate period on a fixed HPP product⁵. If you want to settle the finance early, in full or in part, the bank applies an Early Settlement Premium which it says helps cover its costs when a customer exits early, and which the bank states it does not profit from²².

For a full walkthrough of the product, see our page on the Al Rayan Bank Home Purchase Plan, and for the process of buying a home generally, our home buying guide.

Current accounts and debit cards

The Alrayan Bank Personal Current Account is an everyday account built on the Sharia-compliant principle of Qard, a loan without benefit: the account pays no interest and charges no interest¹⁰. It comes with a debit card and, subject to status, a cheque book, and it supports international payments¹⁰. Balances and transactions are visible instantly in Digital Banking²³.

There are restrictions on where the debit card can be used: it cannot be used at casinos, automatic fuel dispensers or money remittance retailers such as Western Union¹⁶. The bank also states that restrictions may apply to the card in certain countries outside the UK, so it is worth checking before you travel¹⁰. Cash can be withdrawn via ATM, with the bank noting that charges may apply at non-Alrayan Bank machines¹⁰.

One important point for anyone considering the account: overdrafts are not provided, in line with Sharia principles²³, and the bank does not offer personal loans or credit cards either⁹. The current account is therefore a spending and payments account, not a source of borrowing. If you need credit, our guides to credit cards and loans set out how those products work elsewhere.

The bank also handles dormant accounts in a specific way. Current accounts classed as inactive have any remaining debit card and cheque book deactivated²⁴, and balances in dormant accounts can be reclaimed by emailing the bank with confirmation of the account details, together with an uncertified copy of a passport or driving licence²⁴. Separately, where a current account is closed because its balance has fallen below the bank's threshold, any debit cards and cheque books linked to the account are cancelled²⁵.

Fees and charges: how they work and when they are waived

Alrayan Bank's charges fall into two groups: everyday banking charges, which are largely avoidable, and home finance charges, which are tied to events in the life of a Home Purchase Plan. The bank publishes a tariff list for its Home Purchase Plan setting out each charge and when it applies⁵, and its current account pages set out the everyday charges²⁶.

On the everyday side, the bank applies a charge for counter transactions if you do not meet a stated threshold, and it states that it will waive the additional charges if you do meet the threshold²⁶. Fees are also waived for Home Purchase Plan Premier customers²⁶. Additional charges apply to any current account if you do not hold a UK passport and your main residence is not in the UK²⁶. There is a charge for CHAPS same-day payments, and there may be delays if the bank needs to speak to you about the payment²⁷. For international payments outside the EEA, you can choose to pay the recipient's charges²⁷.

On the home finance side, the tariff works on a trigger basis. An arrears management fee is payable each time a monthly payment remains unpaid for at least 7 days after the nominated payment date, but the bank states this fee will be waived if you enter into a monthly agreement to clear your arrears and maintain that arrangement⁵. A missed monthly payment fee covers unpaid or returned Direct Debits, unpaid standing orders, returned cheques and insufficient funds⁵. An administration fee applies when you apply for finance; it is refunded in full if the bank chooses not to progress your application through no fault of yours, but not if you withdraw or if there was misrepresentation⁵. Further charges apply for things like copies of statements, correspondence or deeds, amended offers, settlement statements, and transferring a case to solicitors for enforcement action⁵. The bank also makes a contribution towards its legal costs if you use one of its panel solicitors⁵.

For today's figures, check the bank's own tariff list and account charges pages, which set out every charge in full⁵. If home finance payments become unaffordable, free debt help exists: in Scotland, the Debt Arrangement Scheme freezes interest, fees and charges on debts included in it, and those frozen amounts are written off if you fully complete the programme⁵. Our debt guide sets out the options across the UK.

Who can open an account with Alrayan Bank

Anyone can open an account with an Islamic bank, regardless of their religious beliefs⁴. The bank does not restrict its accounts to Muslim customers, and its ethical screening is a feature of the product rather than a condition of holding it.

There are practical requirements, though. The most significant is that everything runs through Digital Banking: you need to download and register for Digital Banking before you can open a new account with the bank³. Savings applications are only available through Digital Banking⁷, and new customers need move-in dates for each applicant's home address covering the past three years, plus a National Insurance number³. On the current account side, note that new applications and additional accounts are not currently available²³, so the savings range is where new customers can open accounts today.

New savings accounts must be in a single name; joint applications are not accepted, other than reinvesting an existing joint Fixed Term Deposit at maturity⁹. If you cannot open a standard account with any bank because of your immigration status, the rules on basic bank accounts are explained in our current accounts guide.

Banking with Alrayan Bank: app, Desktop Portal and paying money in

Alrayan Bank is an app-first bank. You register for Digital Banking and manage your account through its Mobile Banking app or from a computer via its Desktop Portal²⁸. The app requires Android 11 or above, or iOS 16 or above¹⁷, and you can view up to six months of transactions through it¹⁷. Statements for current and savings accounts are generated monthly and quarterly¹⁷. You can also update your personal details directly through Digital Banking⁹, and if you need support you can send a secure message from within it²⁹.

Paying money in depends on the account. Savings accounts are funded by transfer from another account. For current accounts, you can deposit money at any Lloyds Bank branch in the UK²⁷, and at selected Alrayan Bank branches using a paying-in book, where fees may apply²³; you can also transfer money in online or by money transfer¹⁰. Withdrawals from a current account can be made by online transfer, standing order, Direct Debit, or cash from an ATM¹⁰.

For payments generally, the bank supports daily payment limits for personal customers using the app³⁰, and for sending money abroad you will need the beneficiary's name, IBAN and SWIFT/BIC code³⁰. The bank's own BIC/SWIFT code is ARAYGB22, and every account has an individual IBAN¹⁶. Closing an account is also done digitally: you select the account, choose where the remaining funds should go, confirm your identity and confirm the closure, with any outstanding profit paid to you at closure⁹.

If digital banking is a barrier, it is worth knowing that this bank has no broad branch network to fall back on, so the app and portal are effectively the service. Charities such as Age UK publish help with getting started with online banking²⁸.

Fraud, scams and complaints: what to do and where to get help

Alrayan Bank sets out clear warnings about scams. It states that it will never ask a customer to move their money to a "safe account" and that no one should ever feel pressured into making a payment³¹. It also warns that funds paid to fraudsters may not be recoverable, and asks customers to verify that all new payee details are genuine and trustworthy before a payment is made³¹. The bank's guidance on phishing, vishing and smishing, the fake emails, calls and texts used to steal details, is direct about what to do if a caller's identity is in doubt:

Al Rayan Bank, on its fraud guidance page³²

If you are caught by a scam, the steps to take are the same whatever bank you use: contact your bank or payment provider immediately, contact the police on 101, report the scam to Report Fraud (by phone on 0300 123 2040), and keep records of all contact and correspondence between you and the scammer³³. Our scams and fraud guide explains the main scam types and your rights, including the rules on refunds for push payment scams, where someone is tricked into making a payment themselves.

For complaints, the process starts with the bank. Alrayan Bank aims to respond to all queries within 3 working days²¹. If the bank cannot resolve your concerns, you can refer your complaint to the Financial Ombudsman Service, which is free and independent²⁵. The ombudsman also handles complaints about fraud and scams involving unauthorised payments and identity theft³³. Our consumer protection guide explains how the complaints process works and what the ombudsman can order.

FSCS protection for Alrayan Bank savers: up to £120,000

Money held with Alrayan Bank is protected in the same way as money in any UK bank. Alrayan Bank is a member of the Financial Services Compensation Scheme (FSCS), the UK's deposit guarantee scheme⁵, and eligible deposits held with Alrayan Bank UK are protected up to a total of £120,000⁷. The FSCS explains that this covers deposits in current accounts, savings accounts, cash ISAs and savings bonds³⁵.

The £120,000 limit is per person, per bank. Everything you hold with Alrayan Bank counts together towards that one limit, and it does not reduce the protection you have with other banks. The FSCS's own protection checker illustrates the point: spreading deposits across separate banks protects more money, with £120,000 in a single bank being fully protected³⁶. If you hold more than the limit with Alrayan Bank, the balance above £120,000 is not covered. You can check any bank's protection level on the FSCS website³⁶.

It is also worth noting what FSCS protection is not: it covers the failure of the bank, not falls in the value of investments, and not losses to fraud. The bank's own position on fraud is that it may not be able to recover funds paid to fraudsters³¹, which is why the verification steps in the previous section matter. For a full explanation of the scheme, see our consumer protection guide.