Announcement of the First Bank Participating in the Ministry of Finance Initiative
Individual Investors Exempt from Taxes on Investment Returns
Profit Distribution Occurs Every Six Months According to the Schedule of the Underlying Sukuk
Fragmented Sukuk Cannot Be Transferred to Other Financial Institutions or Trading Systems
Expected Annual Return Rates on Sukuk Range Between 3.5% and 4.69%
The initiative “Individual Sukuk,” launched by the Ministry of Finance last October, has garnered significant attention from global financial institutions and economists who view it as a vital gateway for contributing to the growth of the national economy.
The initiative allows individual investors to invest in government treasury sukuk compliant with Islamic laws (“treasury sukuk”) through the digital channels of participating banks nationally. This strategic move aims to promote financial inclusion and broaden the base of investors in government financial instruments, facilitating secure and hassle-free investments for citizens and residents, starting from a minimum amount of only 4,000 dirhams.
According to the Ministry of Finance’s website, individual investors in Islamic treasury sukuk are not subject to any taxes on investment returns. Both capital and profits (“coupons”) are exempt from any deductions under the current laws and regulations in the country. Profits will be distributed to investors semi-annually based on the distribution schedule of the underlying sukuk, reflecting each investor’s share and holding period during the profit distribution via the participating bank’s platform.
Digital Channels
The Ministry’s website reports that investment participation is conducted through the digital channels of participating banks. Investors can open an investment account digitally through the electronic platforms of these banks, subject to each bank’s terms and conditions. The Ministry of Finance has set a minimum investment for individuals in “treasury sukuk” at 4,000 dirhams per fragmented unit purchased, with individual banks establishing their limits on the number of units or total investment amount per transaction.
Regarding transaction fees and their implementation, the Ministry has coordinated with the participating banks to adopt a preferential fee structure for investing in federal treasury sukuk to encourage wider investor participation. The set preferential fees for investing in fragmented sukuk through participating banks’ digital platforms are approximately 0.25% per purchase transaction and the same for each sale transaction, along with a periodic management fee of up to 0.30% annually (calculated monthly, quarterly, or as applicable) on the total portfolio size.
According to the Ministry of Finance, fragmented sukuk cannot be transferred to financial institutions or other trading systems, as they are registered solely within the digital platforms of the participating banks.
As stated by the Ministry of Finance, Islamic treasury sukuk are securities compliant with Islamic law issued by the federal government of the UAE, sold in local markets in dirhams.
Positive Expectations
Economists have confirmed that the launch of the “Individual Sukuk” initiative provides citizens and residents the opportunity to invest in government treasury sukuk, enhancing participation opportunities in national economic growth. Positive forecasts from the International Monetary Fund and World Bank, along with various global institutions and banks, indicate a brighter outlook for the UAE economy, surpassing expectations for growth in major economies, thanks to its diversified fundamentals.
Experts noted that the UAE economy is characterized by resilience, diversity, sustainability, and resource diversification, without reliance on a single source. It is also based on knowledge, future-oriented economy, and attracting talent and skills from around the world, highlighting that the UAE is about creating opportunities and instilling hope, establishing itself as a global model for empowerment and leadership.
A Significant Shift
Vijay Valisha, Chief Investment Officer at Century Financial, stated that this step represents a significant shift towards enhancing investor participation and establishing a culture of saving and investing beyond conventional deposits. It also provides youth and new investors with the opportunity to possess secure financial instruments backed by the government.
He added that since these sukuk are fully supported by the federal government’s credit guarantee, they offer investors a high level of sovereign credit protection, with almost negligible default risk due to the UAE’s strong financial standing and high credit ratings.
The sovereign funds in the country ensure ample liquidity, enhancing the stability and attractiveness of these financial instruments.
He explained that government debt investments were previously available only to institutional investors; now, individuals and residents can invest through participating banks in the Retail Sukuk program, which act as primary distribution channels.
Investors will be able to subscribe easily via the digital platforms of organized banks in the country, and the Ministry of Finance has confirmed that the announcement of the first participating bank will occur on November 3.
Regarding the expected return on government treasury sukuk, Valisha mentioned that the anticipated annual return for individual investors in UAE treasury sukuk ranges between 3.5% and 4.69%, depending on the segment and maturity period.
He continued that this rate exceeds that of recent institutional auction yields (for maturities between two to five years), indicating a premium for individual investors, and that these sukuk offer better returns than traditional fixed deposits in UAE banks (which range between 2% and 3%) and are tax-exempt, increasing their attractiveness.
Furthermore, he emphasized that the Retail Sukuk program is a secure investment backed by the government, providing competitive returns and capital stability within an Islamic-compliant framework.
Regarding the potential impact on financial company shares, Valisha noted that the precise financial effects are yet to be assessed, and this program could represent an additional source of income for banks and brokerage firms, similar to the commissions earned from stock trading. For instance, First Abu Dhabi Bank, which ranks highest by market capitalization in the country, generated approximately 110 million dirhams from brokerage income in 2024 out of total fee income of 5.52 billion dirhams, about 2% of this total income (according to Bloomberg data). Allowing investors to purchase treasury sukuk via the digital platforms of banks may enhance commission revenues and, in turn, support bank share prices, as financial brokerage remains a secondary activity among the primary income sources of banks.
He added that given the strong financial status of the UAE, high credit ratings, and substantial sovereign reserves, the default risk remains extremely low, boosting the attractiveness of sukuk among individual investors. The initiative aims to provide a secure and appealing investment option compliant with Islamic law, reflecting the UAE’s commitment to sustainable development and mutual prosperity.
Innovative Initiative
Banking expert Osama Al-Rahma described the initiative as successful and innovative, noting that such tools were previously reserved for professional investors only. With the government as the guarantor of these sukuk, it is a solid step and represents one of the channels for saving and investing.
He highlighted that for a balanced economy, the investment returns of individuals should form part of their financial behavior, enabling them to cope with inflation costs or any future financial frameworks, ensuring they maintain a good and secured financial reserve, given that the government itself is the guarantor.
He added that the UAE’s budget is among the strongest globally according to estimates and credit ratings, thus making it a sound and guaranteed investment, particularly as it originates from the government itself. I believe it will not impact corporate shares as sukuk and bonds are generally alternative investment channels. Some countries have previously pioneered offering treasury bonds to individuals, thus creating a financial surplus for the state, which the government uses for infrastructure and economic development, benefiting society and the economy as a whole. “We strongly encourage this awareness of saving for the future.”
Increasing Investment Awareness
Mohammed Ali Yassin, CEO of Mazaya Al Ghaf Min Lunit, expressed that the initiative is excellent and will contribute to increasing the long-term investment culture among citizens and residents in the country gradually, starting from small amounts, which was previously limited due to the limited availability of such products in the market and because financial institutions required relatively large amounts to open investment accounts for individuals.
He noted that investing in these government sukuk starting from small amounts, coupled with receiving semi-annual investment returns, allows investors to maintain positive cash flows from their investments with lower risks than other investment tools.
New Opportunities
Financial analyst Hossam Al-Husseini remarked that the initiative is a qualitative step towards expanding the base of investors in government debt instruments, as it opens doors for citizens and residents to access Islamic treasury sukuk (T-Sukuk), which previously were primarily available to institutions. This is crucial for promoting financial inclusion and a savings culture.
Strategically, it reflects the leadership’s vision to empower individuals to contribute to national economic growth instead of relying solely on institutional investment. This is an important message for strengthening the economy of the individual. Additionally, developing a digital channel with banks to distribute these sukuk facilitates the process and enhances the digital experience, synchronizing with the country’s direction towards a digital economy.
He pointed out that since the initiative is new, secondary liquidity (the ability to sell/transfer units) may be limited or subject to restrictions. The Ministry has indicated that fragmented sukuk cannot be transferred to financial institutions or other trading systems, as they are registered solely within the digital platforms of participating banks. Although they are guaranteed by the federal government, the return is considered a “financial return.”
Overall, I view this initiative as very positive from a fiscal policy, financial inclusion, and individual empowerment perspective. It promotes financial diversification and the ability to save and invest easily, yet as an investor or user, one should evaluate it as an investment tool (not merely risk-free savings) considering returns, duration, liquidity, and taxes.
Regarding the offering and whether it will proceed directly from the government or through banks, Al-Husseini explained that the Ministry of Finance announced the initiative is carried out in collaboration with participating banks in the country through digital channels. Investors can open an investment account digitally via the electronic platforms of participating banks, while external sources affirm that investment will occur through these banks. The name of the first bank will be announced today.
He stated that legally and in terms of regulatory frameworks, the sukuk are issued by the federal government (Ministry of Finance) as the issuer, but the distribution/access to individuals is conducted through the banks as digital platforms, not “direct selling from the government to individuals.” This means that the government issues (through the Ministry of Finance) but offers it to individuals through participating banks as distribution/listing channels, not as a dedicated block for “direct sales to individual investors” without a banking intermediary.
Expected Returns
Regarding the expected yield for government treasury sukuk, Al-Husseini indicated that since individual issuances are likely to be linked to the same government assets (federal treasury sukuk) with similar investments and guarantees, the expected returns available to individuals will likely range from 3.8% to 4.5% annually, depending on maturity (two to five years or more) and issuance terms. The ministry has yet to announce the “defined yield” for the individual initiative, so everything mentioned so far is an estimate based on institutional issuances.
He emphasized that investors should understand that the return here is not fixed interest in a traditional sense but rather a return from Islamic sukuk (it may be participation profits or accrued rent) with semi-annual coupon distribution characteristics as indicated by the ministry.
The government has moved to offer sukuk to individuals to broaden the investor base in government debt instruments, thus relieving part of the government’s demand for financing by including individuals rather than relying solely on institutions and banks. This aims to foster a culture of saving and investing in individuals within the community, contributing to financial stability at both individual and societal levels, reflecting the country’s commitment to economic empowerment, as well as enabling individuals to participate in national economic growth. This means that citizens or residents are part of the financing tools for development and infrastructure rather than simply passive consumers or savers, alongside supporting the local debt instrument market (building a dirham yield curve) and enhancing the depth of financial markets and investment options, in line with the development of a modern Gulf economy, financial inclusion through opening digital channels, unconventional financing, and expanding the base of small and medium asset holders.
Potential Effects
Regarding the potential impact on corporate shares in local capital markets, Al-Husseini stated that since individuals will transfer part of their savings to government sukuk instead of bank deposits or possibly other investments like equities, there may be a slight easing in the liquidity that was previously directed toward stocks, especially if individuals were buying shares as local investors. However, the relative size of this flow at the outset may not be significant enough to cause drastic changes in the stock market soon, unless participation expands widely over time.
Additionally, government sukuk may be viewed as a lower-risk alternative to stocks. Therefore, as the attractiveness of these sukuk increases (due to yields, government guarantees, and tax exemptions), some individual investors may be less inclined towards higher-risk stocks, potentially impacting money flows to certain sectors or smaller companies with higher risks. On the other hand, providing a robust government investment tool could enhance overall market confidence, possibly supporting stocks in the medium term, especially if general investment culture rises.
From a corporate perspective, if demand for capital shifts toward government debt instruments, companies may need to raise the returns they offer (such as through shares or dividends) to attract investors, positively impacting firms that provide good dividends or have strong business models.
Overall, I believe this initiative could gradually lead to shifts in asset allocation among local investors (from stocks/deposits towards less risky government sukuk). Companies with high dividend payouts or stable growth may face greater competition in attracting investors, while companies that offer added value and high growth may benefit as investors seek “higher yields” if they have purchased sukuk.
Investment Transformation
Dr. Alaa Nasr, a financial and commercial legal advisor, stated that the “Individual Sukuk” initiative represents a qualitative change in the national financial landscape, being the first government initiative allowing citizens and residents to directly invest in federal treasury sukuk, with a minimum investment of 4,000 dirhams for each fragmented unit. This opens the door for a broad segment of society to participate in supporting the national economy and developing savings in a safe and organized manner.
This approach aligns with the vision of responsible leadership in empowering people and enhancing financial and investment awareness among individuals.
He noted that the provision of semi-annual returns through what are known as investment coupons, calculated based on ownership percentage and holding duration of sukuk, strengthens the principles of transparency and fairness in distribution. The complete tax exemption on profits and capital represents an attractive incentive, making investment in sukuk a long-term option for investors seeking income stability and low risk. The preferential fees set at approximately 0.25% per buying or selling transaction, along with an annual management fee not exceeding 0.30%, positions it as one of the most efficient and competitive financial instruments in the region.
Moreover, from a legal and financial perspective, individual sukuk exemplify good financial governance, as they are issued according to Islamic law and are subject to strict supervision from regulatory authorities to ensure investor protection.
Additionally, the maturity periods of sukuk range from two to five years, with the possibility of extending them within the federal issuance strategy, in line with the state’s sustainable financing plans.
The initiative reflects the UAE’s vision of building a diverse and sustainable economy, enhancing individual contributions to the national growth cycle, as it not only enhances financial awareness but also confirms that investing in high-quality government instruments is an investment in the state’s trust and financial stability, establishing the UAE as an attractive environment for capital, and a global financial hub balancing safety, yield, and sustainable development.
Strategic Decision
George Pavel, an economic expert, pointed out that the offering will not be directly from the government, as the Ministry of Finance has chosen a model relying exclusively on digital channels of participating banks within the country. This strategic decision enables the government to leverage a robust digital infrastructure and a wide customer base among banks, ensuring a swift rollout and widespread access to the initiative with an emphasis on rapid execution.
He noted that it is impossible to predict the interest rate on sukuk since there is no “fixed interest rate” but rather a variable yield determined by the market. Based on outcomes from auctioning treasury sukuk designated for institutions in September, the total annual yield was at 3.64% and 3.72% for sukuk due in 2028 and 2030, respectively. The yields of new sukuk may shift in tandem with price movements set by the central bank.
Concerning the expected impact on corporate shares, Pavel anticipated a dual effect. In the short term, stock markets may experience some competition for liquidity, as some investors may shift their funds from stable dividend-paying stocks (like bank and utility stocks) to safer government sukuk. However, in the long term, the expected effect will be positive, as this initiative contributes to increased financial awareness and expands the base of local investors, thereby enhancing the depth and stability of the entire capital market, ultimately benefiting the stock market by creating a more mature investment environment.
He indicated that the government’s move to offer sukuk aims to achieve several integrated strategic objectives. The primary goal is to deepen the local capital market by establishing a yield curve denominated in UAE dirhams, which is essential for pricing all debts in the economy and enhances financial stability.
Socially and economically, the initiative aims to promote a savings culture and enable individuals to participate in economic growth. Finally, the offering seeks to expand and diversify the investor base in government debt, reducing reliance on a limited number of large institutional investors and creating more stable sources of government financing.
Diversifying Investments
Ahmed Asiri, an expert in market research strategies, stated that the treasury sukuk initiative for individuals represents a qualitative evolution in the trajectory of updating government debt markets in the UAE, reflecting a strategic direction towards diversifying the available investment and savings tools for individuals, thereby enhancing the depth and efficiency of the market.
The offering is executed directly by government through participating banks via their digital platforms, making the investment in federal treasury sukuk straightforward and direct, allowing individuals to benefit from returns based on the Emirates Central Bank’s reference rate plus a credit spread specific to each issuance segment based on the sukuk’s maturity, ensuring fair and transparent pricing that reflects the state’s sovereign credit strength.
This move opens the door for individuals to participate in what could be described as one of the safest and most stable investment tools, reinforcing a culture of regular savings through financial instruments compliant with Islamic law, aligning with the state’s long-term economic vision of enhancing financial inclusion and expanding the local investor base.
From a strategic standpoint, this initiative lays the groundwork for developing a secondary sukuk market in the coming years, which will enhance liquidity and trading within the local debt market, similar to what exists in major economies. Establishing an active sukuk market adds a new dimension to the financial market system in the country, creating a stable funding channel that supports public treasury policies and provides individuals with a reference investment tool offering acceptable returns and low risks, which has long been awaited by many individual investors, previously exclusive to qualified investors and institutions. Such a market has been a pillar in building wealth for families in major economies, with participation rates from households accounting for up to one-fifth of total government debt in countries like the United States.
He further explained that the stock market and listed companies target a different segment of investors than the debt market, which reflects a financial commitment indicating a willingness to take lower risks for returns that align with risks and a previously defined maturity period. Therefore, the debt market, especially treasury issuances, suits needs for saving and preserving capital, unlike stock markets and company ownership, which continually seek to maximize shareholder capital with higher risks.
In other words, individual sukuk represents a distinguished savings tool long anticipated, and a step in the journey towards constructing a complete national debt market that is steadily moving towards global efficiency and liquidity standards, reinforcing the UAE’s position as one of the most stable and developed economies in the region.
“Fitch”: Opens a New Channel for Government Financing Sources in the UAE
Bashar Al-Natour, Global Head of Islamic Finance at Fitch Ratings, stated that the Ministry of Finance’s launch of the “Individual Sukuk” initiative marks a significant new step in the development of the local debt market denominated in UAE dirhams, granting a wide range of citizens and residents the opportunity to invest in government financial instruments compliant with Islamic law—a category of investors that did not have access to such investment channels previously.
In statements to the media, Al-Natour noted that the debt market in the UAE historically began with dollar-denominated issuances by companies and banks before witnessing a growing governmental momentum in recent years to develop debt markets in dirhams.
Moreover, as issuances expanded from bonds to institution-directed sukuk, the new initiative offers individuals an opportunity to participate in government investments starting from a minimum of 4,000 dirhams, aiming to enhance financial inclusion and broaden the local investor base.
He mentioned that this initiative aligns with previous experiences in other countries, such as Saudi Arabia, Malaysia, and Indonesia, where similar individual sukuk programs have been launched, reflecting a global trend towards empowering citizens to invest in sovereign debt instruments in safe and organized ways compliant with Islamic principles.
According to Al-Natour, the success of the initiative in the medium term will contribute to opening a new financing channel for the government, provided that it is accompanied by an awareness campaign to educate new investors about the nature of these instruments regarding returns and risks, especially since this segment is not accustomed to dealing with sovereign debt products.
He pointed out that the Islamic aspect of the initiative enhances its inclusiveness, allowing it to attract a segment sensitive to investing in non-Islamic-compliant instruments while also attracting those unconcerned about Islamic compliance. Al-Natour explained that some Islamic banks in the UAE have a non-Muslim client base reaching nearly 50%, reflecting the widening interest in sharia-compliant tools and attracting diverse segments to the initiative.
Regarding the expected return on sukuk (Profit), Al-Natour clarified that it is still too early to judge, as they will be determined after the issuance regulations or the executive framework is set, along with the launch of offerings, issuance durations, and their returns. However, he affirmed that the new sukuk will play an important role in diversifying individual investment portfolios, directly connecting them to secure government channels.
He also emphasized the importance of monitoring the development of the initiative over the coming period, especially in terms of whether it will adopt financial technologies (“FinTech”) in investment and trading operations, which is essential to facilitate electronic participation by individuals or automated processes through banking apps or websites, or whether it will rely on traditional methods of distribution, investment, and trading in the secondary market.
Al-Natour concluded his remarks by emphasizing that the initiative targets an “underserved segment,” offering them for the first time an opportunity to invest in sharia-compliant sovereign instruments issued by the government, which enhances the diversification of local financing markets and supports the country’s vision in empowering individuals to actively participate in economic development.
“Moody’s”: Enhances Revenues for Islamic Banks Through Fees and Commissions
Moody’s Investors Service noted that the “Individual Sukuk” initiative announced by the UAE government will yield tangible benefits for Islamic banks in the country by creating new revenue sources and enhancing their liquidity levels. The new program, which allows individual investors to subscribe to government financial instruments compliant with Islamic law, is expected to increase engagement between banks and individual investors, thus strengthening the UAE’s position as a developed hub for Islamic finance.
Moody’s anticipated that the role of Islamic banks as intermediaries in subscription, custody, and trading operations could enhance their non-funding revenue in the long term through increased net fees and commissions. These banks will also benefit from higher deposit inflows resulting from individual investor subscriptions, supporting their short-term liquidity.
In statements to the media, they mentioned that the initiative represents a strategic step to support the growth of the Islamic banking sector and expand the local investor base, thereby reinforcing the strength and sustainability of the UAE’s financial system.
They noted that on October 24, the UAE, rated (Aa2 with a stable outlook), announced plans to launch a new program for individual sukuk, allowing individual investors to invest in government-backed financial instruments compliant with Islamic law. Financial institutions are expected to benefit from this initiative by diversifying their revenue sources and increasing interactions with individual investors while enhancing liquidity levels.
They added that participating banks will act as intermediaries to facilitate subscription, custody, and trading of sukuk, yielding new revenue streams based on fees while also aligning with the national policy aimed at developing the Islamic finance industry.
During the first half of the year, Islamic banks in the UAE, including Dubai Islamic Bank (A3 Stable, ba1), Abu Dhabi Islamic Bank (A2 Stable, baa3), and Sharjah Islamic Bank (Baa2 Stable, ba2), recorded a return on assets of 2.1%, surpassing their traditional counterparts, which recorded 1.8%, benefiting from lower funding costs (3.1% compared to 3.8% for traditional banks). Non-funding revenues constituted 35% of the total operating income for Islamic banks during the first half of 2025, a rate close to that recorded among traditional banks.
Moody’s expects that the launch of the individual sukuk program will contribute to long-term non-funding revenue enhancement, especially through increased net fees and commissions, which accounted for 18% of total operating income during the first half of 2025.
They noted that with individual investors subscribing to sukuk, participating banks are expected to experience increased deposit inflows, enhancing their short-term liquidity, as of June 2025, liquid assets constituted 23% of total tangible assets in Islamic banks in the UAE, significantly lower than the 44% recorded in traditional banks.
This difference is attributed to the limited range of liquid instruments compliant with Islamic law; however, ongoing market developments may gradually expand this access to such instruments. Moody’s further predicted that the initiative will contribute to enhancing capital markets in the UAE, albeit slightly, by expanding the investor base in domestic currency issuances to include individual investors.