6 basic advantages for individuals buying treasury bonds in the UAE

On October 24, the Ministry of Finance announced the launch of the “Individual Sukuk” initiative, to enable citizens and residents to invest in government treasury bonds compatible with the provisions of Islamic Sharia, through the digital channels of a number of participating banks.

Benefits of investment The most important benefits and advantages of investing in these instruments, according to what the Ministry of Finance published on its website, as well as the three banks that have signed with them so far, are the possibility of investing in small amounts and with digital ease, as it allows individuals to invest in government treasury instruments with relatively small financial denominations starting from 4,000 dirhams for each transaction, which can be doubled up to 28 thousand dirhams, with the possibility of multiple transactions, and opening the investment through digital platforms affiliated with banks, and using the Emirati or digital ID, makes the process easy. And easy.

Investing in treasury bonds offers competitive returns compared to traditional deposits. Treasury bonds offer a higher return than most bank deposits (up to about 3.66% or more), which makes them an attractive option to save money in exchange for good returns.

These sukuks are also backed by the government, as they are linked to government-backed assets, which enhances confidence among individual investors looking for safe and stable investments, in addition to their compatibility with Islamic law attracting a segment of investors who prefer halal investment tools.

“Individual Sukuk” is a promotion of the culture of saving and long-term investment. The initiative is part of the Ministry of Finance’s efforts to enhance financial inclusion and encourage individuals to save and invest instead of keeping liquidity in low-yielding bank accounts.

These instruments are characterized by tax exemptions on investment returns, as well as exemption from any deductions, which is an additional factor that enhances their attractiveness as a savings and investment option.

These instruments also allow for easy follow-up and management of investments, as investors can track and manage their investments through banks’ digital applications, which provides greater comfort and control compared to some traditional investment tools.

Strong interest Since the launch of the initiative, the Ministry of Finance has signed three agreements with three major banks in the country: “Abu Dhabi Islamic”, “Emirates NBD”, and “Emirates Islamic”. The digital platforms of these banks allow investors, citizens and residents, to register electronically using the Emirates ID card or digital ID, complete “Know Your Customer” requirements, create a risk file, and view the conditions and details of transactions.

Although official data on the number of individual subscribers and the amount of money invested has not yet been published, given that the initiative is new, the general indicators of the market, and the demand for government issuances in general in the UAE, indicate a strong potential interest from individuals, especially with the facilitation of digital terms and the low entry level into them, and the signing of major banks’ agreements to implement the initiative in a short time reflects a broad willingness within the UAE financial system to support individuals’ participation.

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“Sukuk” and “Bonds”

Treasury bonds are securities compatible with Islamic Sharia, representing an “ownership share” in assets or projects used as a source of return, and the investor not only lends to the government, but also owns part of a real asset that generates a return from profits or rent.

They differ from bonds, which represent a debt on the issuing party (whether it is a government, a company, or a bank), according to which a fixed periodic interest is paid and then the capital is returned upon maturity. Bonds do not give the investor an ownership right in the assets, but rather they are a debt contract.