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Lloyds to offer Islamic student account

The UK's fifth largest high street lender Lloyds TSB Group is to offer student accounts that comply with Islamic law at its 2,000 branches, the first of its kind in the UK.

In order to comply with requirements of Sharia law, the Islamic Student Account will not pay or charge interest, nor will the money held in the accounts be invested in specific industries, including alcohol or gambling.

Lloyds, which has been offering Sharia-compliant mortgages since 2005, will be the first UK lender to offer an Islamic student account.

Students opening the account will be offered a GBP1,500 interest-free overdraft along with free gift offered with standard student accounts.

In June 2006 Lloyds announced that it would expand its Islamic banking to all its branches, offering Sharia-compliant banking services across Britain, where there is a potential market of two million Muslims. Lloyds had previously offered such accounts in only a few branches since originally launching the product last year.

Traditionally a large number of Muslims have shied away from mainstream banking in the UK because it did not comply with Sharia law.