Your questions implies that this is an outdated system and that the way it is being done now is more āmodernā.
But that is not the case, and it is not about better practices or techniques. It is about being fair and sharing the risk.
Islamic finance extends beyond its well-known characteristics: interest-free banking and the prohibition of investment in items or activities deemed un-Islamic, such as prostitution, gambling, pornography, pig farming and alcohol. In contrast to conventional loans, Islamic bank loans are confined to financing the purchase of physical assets, to which they have recourse in case of default.
Creditors and debtors alike must share business risk, Islamic finance prohibits speculation (such as was practised by AIG with credit default swaps) and similarly prohibits trades that are considered to have excessive risk due to uncertainty, such as naked short-selling, where there is uncertainty involved in the future delivery of the underlying asset. Arguably, Islamic finance also prohibits speculation that property prices will forever continue to rise, as well as bailouts, since they are only loss and not profit sharing for governments.
If Monzo, behind the scenes, are keeping your in their of England holding account then they receive interest at the base rate on your . To maintain strict compliance I guess thatās a big no-no?
Common question and thought provoking too. Each to their own but you do what you can to follow your beliefs. If it means only hoarding cash under mattresss then people may do that.
But if a bank account fulfills a need, storing money safely, providing access to it, digital payments for both outgoing and incoming then that is your intentions fulfilled. How a bank uses money/assets it has access to, well ā¦
I would have answered similar to what @beirdo said. They put it better than I could have.
I think religious teaching have different interpretation for different people and personally I think if someone believes in a religion then they choose to impose rules and limitations on themselves. Islam tells us principles basic but wide in scope.
Iāve just been chatting about the growth of Islamic FinTech & apparently because Monzo wonāt be paying interest on userās balances in their Monzo accounts, Monzo might already be offering Shariah compliant current accounts.
If thatās true, it might be good to mention this on Monzoās ethics page?
This made me wonder, where do Islamic Banks in the UK keep their deposits? or they just decline to accept interest from Bank of Englandā¦ Iāll try to find out.
I think that would be enough to make it compliant, as you are not getting any interest in your personal account.
But ultimately it depends on what the money is invested in.
And doesnāt all the banks in the UK hold the money in the Bank of England? Event the Sharia compliant ones?
Some of the money is used for overdrafts, and given Monzo is not āofficiallyā an Islamic account provider thereās a change that money can be used for non-compliant things by users who are in their overdraftā¦
It comes down to personal conviction in your faith.
Donāt forget, Muslims arenāt just supposed to avoid paying, receiving or recording interest, they should also consider it a bad thing in itself, just like some would consider drugs or any other vice.
Iām not here to preach about the ills or virtues of interest.
But itās the same principle as say other issues/causes people may consider close to their heart. Environmental impact
Child Labour
Animal Testing
Etc.
A business that was heavily involved in these things would be ones you would actively avoid purchasing from/investing in.
If it was a passive engagement in the above that was difficult to avoid then itās all about how heavily that weighs on your conscious. For some it would have to be absolutely devoid of any (X cause) whereas for others there may be some leeway.
Wouldnāt use the word āprofitingā - base rate of 0.5% is hardly enough to make any profit. perhaps earning revenue would be a more appropriate term.
But if earning base rate from parking deposits at BoE is considered non-shariah compliant then I really do wonder how central banks of islamic countries control monetary policies if they arenāt allowed to influence money supply with interest ratesā¦
A quick Google search shows the UAE has a central bank interest rate.
My impression, and please correct me if Iām wrong, I donāt know much about Islam at all, is that these types of rules are a āto the greatest extent practicalā type of deal. Maintaining a fiat currency without a central interest rate seems outside the realm of practicality.
Before I write I am going to the point that I am not going to discuss what is a shariah law (law decreed by the Creator) to run a bank or what is ins and outs of islamic banking. Rather I am just going to share my personal use (consumer view) of monzo in light of Islam.
Simply Monzo current account like most other bank doesnāt give interest and that is a PASS for islamic way of dealing money.
Not all the POTās give interest, so itās easy to sort out money without been getting involved in interest, another Pass.
I donāt use overdraft (or my overdraft is ZERO), so that there is no option I end up giving more money, another pass.
it encourages doing budget, so less use of money in Not Necessary places. Another good way of living life!
In my understanding, I am using Monzoās user friendly service to use it in a Halal way, so itās a Pass for me in a consumer point of view.
I wish / would advice if monzo provides any option of direct spending of money for charity (which ever charity for good purpose); that would be one step ahead from Islamic point of view of utilising money!
Sure. One can have direct debit for anything on earth.
What about having one button charitable option from Monzo itself to any charity like sharethemeal.
While one can use any MasterCard/Apple pay for international money transection, why bother putting transferwise within monzo! Possibly that makes life few steps easier.
Monzo isnāt Sharia compliant as your money on deposit is used to earn interest (not given to you) plus you have no control what industry the money is used in as it wouldnāt be possible to know.
Lloyds Bank offered an Islamic Account for a long time but Iāve just had a look and seen theyāve withdrawn it. I wonder whyā¦
This is incorrect. Monzo donāt invest deposits, they just hold them in the Bank of England:
Monzo currently looks after about Ā£1.1bn, and, though other banks lend most of the millions they have sitting in deposits, none of Monzoās cash is being flash-traded or gambled or divvied up into baroque financial instruments. Almost all of it sits in the Bank of England, which, for a bank, is about as dull as it gets.
in their 
of England holding account then they receive interest at the base rate on your 