Todays Announcement: First Bank Participating in the Ministry of Finance Initiative
Individual Investors Exempt from Tax on Investment Returns
Profit Distribution Occurs Every Six Months as per Sukuk Schedule
Fractional Sukuk Cannot Be Transferred to Other Financial Institutions or Trading Systems
Expected Annual Yield on Sukuk Ranges from 3.5% to 4.69%
The “Individual Sukuk” initiative launched by the Ministry of Finance last October has garnered significant interest from global financial institutions and economists, who assert it is a vital gateway for participating in the growth of the national economy.
This initiative allows individual investors to invest in government treasury sukuk compliant with Islamic law (“Treasury Sukuk”) through digital platforms of participating banks within the country. It aims to promote financial inclusion and expand the investor base in government financial instruments by enabling citizens and residents to invest easily and securely, starting with amounts as low as 4,000 dirhams.
According to the Ministry of Finance’s website, individual investors in Islamic treasury sukuk are not subject to any tax on investment returns, and both the principal and profits (“coupons”) are exempt from taxes under the current laws and regulations. Profit distributions (“coupons”) will be made to investors on a semiannual basis, according to the profit payment schedule for the main sukuk. Each investor will receive profits proportional to their ownership stake and investment duration during the profit distribution period through the participating bank’s platform, reflecting both the fractional ownership and the length of the investment period.
Digital Channels
Investment participation is facilitated through the digital channels of the participating banks in the “Individual Sukuk” initiative. Investors can open investment accounts digitally through the electronic platforms of the participating banks, following each bank’s specific terms and conditions. The Ministry of Finance has set a minimum investment limit of 4,000 dirhams for “Treasury Sukuk” for each fractional unit purchased. Participating banks may also impose specific limits on the number of units or total investment amount per transaction.
Regarding transaction fees and their application, the Ministry clarified that in coordination with participating banks, a preferential fee structure has been approved to encourage broader investor participation. The set fee for investing in fractional sukuk through digital platforms is approximately 0.25% for each purchase transaction and the same for each sale transaction, along with a periodic management fee of up to 0.30% annually (calculated monthly or quarterly) on the total investment portfolio size.
According to the Ministry of Finance, fractional sukuk cannot be transferred to other financial institutions or trading systems, as they are registered solely within the digital platforms of the participating banks.
The Islamic treasury sukuk are Islamic-compliant securities issued by the federal government of the UAE and are sold in local markets in dirhams.
Positive Expectations
Economists affirm that the launch of the “Individual Sukuk” initiative enables citizens and residents to invest in government treasury sukuk and enhances opportunities for participation in national economic growth. They highlight positive expectations from the International Monetary Fund, the World Bank, and various global institutions and banks regarding the growth prospects of the UAE economy, which are expected to exceed those of larger economies due to its diverse fundamentals.
Experts note that the UAE’s economy is characterized by resilience, diversity, sustainability, and multiple resources without dependence on a single source. It is based on knowledge and future economies aimed at attracting talent and skills from around the world. They emphasize that the UAE creates opportunities and instills hope while reinforcing its position as a global model for human empowerment and fostering entrepreneurship.
Transformational Shift
Vijay Valisha, CEO of Investing at Century Financial, stated that this move marks a significant shift in enhancing investor participation and establishing a culture of saving and investing that goes beyond traditional deposits. It also provides young people and newcomers to investment with safe financial tools backed by the government.
He added: As these sukuk are supported by the full trust and credit guarantee of the federal government, they offer investors a high level of sovereign credit protection, with minimal risk of default due to the robust financial position of the UAE and its high credit ratings.
The state’s sovereign funds ensure abundance in liquidity, which enhances the stability and attractiveness of these financial instruments.
He explained that investments in government debt instruments were previously available only to institutional investors, but now individuals and residents can invest through participating banks in the Retail Sukuk program, which serve as primary distribution channels.
Investors will be able to subscribe easily through the digital platforms of the participating banks, and the Ministry has confirmed that the first participating bank will be announced on November 3.
Concerning the expected return on government treasury sukuk, Valisha mentioned that the anticipated annual yield for individual investors in UAE treasury sukuk ranges from approximately 3.5% to 4.69%, depending on the tranche and maturity period.
This rate is higher than those of recent institutional auctions (for periods between two and five years), indicating a premium for individual investors. These sukuk provide better returns compared to traditional fixed deposits in UAE banks (which range from 2% to 3%) and are also tax-exempt, increasing their attractiveness.
He pointed out that the retail sukuk program is a secure government-supported investment that offers competitive returns and capital stability within a framework compliant with Islamic law.
Regarding the impact on financial company stocks, Valisha indicated that the exact monetary effects have not yet been studied, but the program could potentially represent an additional revenue source for banks and brokerage firms, akin to the commissions they earn on stock trades. For instance, First Abu Dhabi Bank, the largest by market capitalization in the state, achieved about 110 million dirhams in brokerage revenue in 2024 from a total of 5.52 billion dirhams of fees and commissions income, representing approximately 2% of total income (according to Bloomberg data). Thus, allowing investors to purchase treasury sukuk through digital platforms may boost commission revenues and thereby support bank stock prices, as financial intermediation remains a secondary source of banks’ primary income streams.
He added: Given the strong financial status of the UAE and its high credit ratings and substantial sovereign reserves, default risks remain extremely low. This enhances the appeal of sukuk among individual investors. The initiative aims to provide a secure and attractive investment option compliant with Islamic law, reflecting the UAE’s commitment to sustainable development and mutual prosperity.
Innovative Initiative
Banking expert Osama Al Rahma confirmed that this initiative is successful and innovative, as such tools were previously available only to professional investors. Given that the government guarantees these sukuk, it represents a good step and constitutes one channel for saving and investing.
He stated that for a community to have a balanced economy, the investment returns of individuals should form part of their financial behavior pattern, which reflects an ability to face inflation costs or any future frameworks, ensuring that individuals maintain a solid and guaranteed financial reserve, especially since the government itself is the guarantor.
He added that the UAE’s budget is one of the strongest according to global credit ratings estimates, which categorize it among the top tiers. Thus, this investment is sound and secure from a professional standpoint, particularly as it is backed by the government. He does not believe it will affect the stocks of companies because sukuk and bonds are generally considered alternative investment avenues. Some countries have led in providing such treasury bonds to individuals, thus creating a financial abundance for the state, which in turn uses these funds for infrastructure and economic development, benefiting society and the economy as a whole. He emphasized: “We strongly encourage this to spread this saving awareness in the future.”
Increasing Investment Awareness
Mohammad Ali Yaseen, CEO of Mazaya Al Ghaf from Lunit, believes that the initiative is excellent and will contribute significantly to increasing the long-term investment culture among citizens and residents in the state gradually, starting from minimal amounts. Previously, such products were limited in the market, as financial institutions asked for relatively large amounts to open investment accounts for individuals.
He noted that investing in these government sukuk starting from small amounts and receiving semiannual investment returns enables investors to maintain positive cash flows from their investments and entails lower risk compared to other investment instruments.
New Opportunities
Financial analyst Hossam Al-Husseini stated that the initiative represents a qualitative leap in broadening the investor base in government debt instruments since it opens the door for citizens and residents to access Islamic treasury sukuk, which were mainly restricted to institutions in the past. This is vital for enhancing financial inclusion and saving culture.
He added: Strategically, it reflects the leadership’s vision to empower individuals to contribute to national economic growth rather than solely rely on institutional investments. It’s a vital message to boost the human economy, alongside developing a digital channel with banks to distribute these sukuk, facilitating the process and enhancing the digital experience, aligning with the country’s direction towards a digital economy.
He clarified that since the initiative is new, secondary liquidity (the ability to sell or transfer units) might be limited or subject to restrictions, as the ministry indicated that fractional sukuk cannot be transferred to financial institutions or other trading systems; they are registered solely on the digital platforms of participating banks. In spite of being guaranteed by the federal government, the return is regarded as “financing return.”
He emphasized that this initiative is very positive from a fiscal policy perspective, financial inclusion perspective, and individual empowerment, as it enhances financial diversification and the ability to save and invest easily. However, as an investor or user, one should assess it as an investment tool rather than just saving without risk, factoring in return, term, liquidity, and taxes.
Regarding the issuance and whether it will be directly from the government or through banks, Al-Husseini noted that the Ministry of Finance announced that the initiative is implemented in cooperation with banks participating in the state through digital channels. Investors can open investment accounts digitally via the electronic platforms of participating banks. External sources confirm that investment will occur through participating banks, with the name of the first bank announced today.
He indicated that from a legal and regulatory standpoint, the sukuk are issued by the federal government (Ministry of Finance) as the issuer, but distribution to individuals is done through participating digital banks rather than a “direct sale from the government to individuals,” meaning that citizens deal directly with the Ministry of Finance without a banking intermediary. Thus, the issuance is from the government (via the Ministry of Finance), but it targets individuals through participating banks as distribution platforms, not as a specific bulk “direct sale to individual investors” without a bank intermediary.
Expected Returns
Regarding the expected yield on government treasury sukuk, Al-Husseini explained that since individual issuances will likely be linked to the same government assets (federal treasury sukuk) and will follow similar deployment and guarantee, the expected yield for individuals is anticipated to be between approximately 3.8% and 4.5% annually, depending on the term (two to five years or more) and issuance conditions. So far, the ministry has not announced the predetermined “yield rate” for the initiative dedicated to individuals; therefore, all previous estimations are based on institutional issues.
He noted that it is crucial for investors to recognize that the yield here is not a fixed interest in the traditional sense but rather returns from Islamic sukuk (possibly profit-sharing or rental income) featuring semiannual coupon distribution as indicated by the ministry.
He mentioned that the government has opted to issue sukuk for individuals to widen the investor base for government debt instruments, thus mitigating part of the government financing demand by including individuals rather than relying solely on institutions and banks. This also aims to cultivate a saving and investment culture among community members, which contributes to financial stability at both the individual and community levels and reflects the state’s commitment to economic empowerment. Ultimately, this allows citizens or residents to participate in funding development and infrastructure—not merely as passive consumers or savers—and supports the local debt instrument market (building a dirham yield curve) and enhances the depth of financial markets and investment options, aligning with the development of a modern Gulf economy and financial inclusion by opening digital channels and unconventional financing options, while expanding the base of small and medium asset holders.
Potential Impacts
Regarding the potential impact on company stocks in local capital markets, Al-Husseini remarked that as individuals convert part of their savings into government sukuk instead of bank deposits or possibly other investments like stocks, a slight liquidity reduction aimed at stocks may occur, especially if individuals were purchasing stocks as local investors. However, this initial liquidity shift might not be large enough to cause drastic changes in the stock market soon, unless participation expands widely over time.
He added that government sukuk may be seen as a less risky alternative to stocks; thus, as the attractiveness of these sukuk increases (due to returns, government guaranty, tax exemption), some individual investors may become less inclined towards higher-risk stocks, which could impact capital flow to some sectors or smaller companies with higher risks. Conversely, providing a robust government investment vehicle could strengthen overall market confidence, potentially supporting stock prices in the medium term, especially as general investment culture improves.
From the companies’ perspective, if the demand for capital shifts towards government debt instruments, firms may need to increase returns they offer (for example, through shares or dividends) to attract investors, which may positively affect companies that provide strong dividends or have robust business models.
Overall, I see this initiative potentially bringing a gradual shift in asset allocation among local investors (shifting from stocks/deposits towards less risky government sukuk). Companies with high dividends or stable growth may face increased competition for attracting investors, while companies that deliver added value and high growth could benefit, as investors will seek higher returns if they have invested in sukuk.
Investment Transformation
Dr. Alaa Nasr, legal and financial advisor, stated that the “Individual Sukuk” initiative represents a qualitative leap in the national financial landscape, being the first government initiative allowing citizens and residents to invest directly in federal treasury sukuk, with a minimum investment of 4,000 dirhams for each fractional unit. This opens the door for a wide segment of society to participate in supporting the national economy and enhancing savings in a secure and organized manner.
This approach aligns with the leadership’s vision of empowering individuals and enhancing financial and investment awareness among the populace.
He added that providing semiannual returns through what is known as investment coupons, calculated based on the ownership share and retention period of sukuk, fosters transparency and fairness in distribution. The complete tax exemption on profits and capital serves as an attractive incentive, making sukuk investment a long-term option for investors seeking stable returns and low risks. Further, the preferred fees set at around 0.25% for each buying or selling transaction, along with an annual management fee not exceeding 0.30%, positions sukuk as one of the most efficient and competitive financial instruments in the region.
He highlighted that legally and financially, individual sukuk exemplify sound financial governance, as they are issued in accordance with Islamic law and are under strict supervision from federal regulatory authorities to protect investors.
Moreover, the maturity periods for sukuk range between two and five years, with the possibility of extension based on the federal issuance strategy, aligning with the state’s sustainable financing plans.
The initiative reflects the UAE’s vision for building a diversified and sustainable economy and enhances individuals’ contributions to the national growth cycle. It not only nurtures financial awareness but reaffirms that investing in high-quality government instruments represents an investment in the state’s stability and reliability, thereby cementing the UAE’s position as an attractive environment for capital and a global financial center balancing safety, returns, and sustainable development.
Strategic Decision
Economic expert George Pafal stated that the issuance will not come directly from the government; instead, the Ministry of Finance has opted for a model relying exclusively on the digital channels of participating banks in the initiative within the country. This strategic decision allows the government to leverage the strong digital infrastructure and wide customer base of banks, ensuring a rapid launch and extensive reach for the initiative, prioritizing swift implementation.
He noted that the return on sukuk cannot be predicted since there is no “fixed interest rate,” but a variable return determined by the market. Based on the auction results for institutional treasury sukuk in September, the overall annual yield was 3.64% and 3.72% for sukuk maturing in 2028 and 2030, respectively. Returns on the new sukuk may change with movements in interest rates set by the central bank.
Regarding the expected impact on corporate stocks, Pafal anticipates a dual effect. In the short term, stock markets may experience some competition for liquidity, as some investors may shift funds from stable dividend stocks (like banking and utility shares) to safer government sukuk. However, in the long run, a positive effect is anticipated; the initiative helps enhance financial awareness and broaden the local investor base, which in turn strengthens the overall stability and depth of capital markets, benefitting the stock market by fostering a more mature investment environment.
He indicated that the government’s move to issue sukuk aims to achieve various integrated strategic objectives. The most critical is to deepen the local capital market by establishing a dirham-based yield curve, which is fundamental to pricing all debts in the economy and strengthens financial stability.
Socially and economically, the initiative aims to promote a saving culture and enable individuals to partake in economic growth. Finally, the issuance seeks to diversify and broaden the investor base in government debt, reducing reliance on a limited number of major institutional investors while making government financing more stable.
Diversification of Investments
Ahamed Asiri, a market research strategy expert, stated that the individual treasury sukuk initiative represents a crucial development in the modernization track of government debt markets in the UAE, mirroring a strategic approach towards diversifying the investment and savings options available to individuals, enhancing market depth and efficiency.
He indicated that the issuance occurs directly from the government through participating banks via their digital platforms, making the process of investing in federal treasury sukuk easy and straightforward, allowing individuals to benefit from returns linked to the central bank’s reference rate, plus the credit spread specific to each issuance tranche based on its duration and maturity, ensuring a fair and transparent pricing reflective of the country’s sovereign credit strength.
This step opens the door for individuals to get involved in one of the most secure and stable investment tools, cementing a culture of systematic saving through financial instruments compliant with Islamic law, as part of the nation’s long-term economic vision to promote financial inclusion and expand the local investor base.
Moreover, from a strategic perspective, the initiative lays the groundwork for developing the secondary sukuk market in the coming years, contributing to increased liquidity and trading in the local debt market, similar to leading global economies. An active sukuk market introduces a new dimension to the country’s financial system, creating a stable financing channel supporting public treasury policies while providing individuals with a reference investment tool with acceptable returns and low risks. This long-awaited tool has been previously limited to qualified investors and institutions, standing as a pillar for household wealth-building in major economies, with household participation reaching around one-fifth of the total government debt market, such as in the United States.
He stated that the stock and trading companies target another segment of investors in company ownerships, which differs from the debt market that reflects a financial commitment aligned with a preference for taking lower risks for tempered returns and predetermined maturities. Thus, the debt market, especially treasury issuances, aligns with saving and capital preservation needs, unlike the equity market seeking to consistently maximize shareholder capital with higher risks.
In summary, individual sukuk represent a distinguished saving tool that has been highly anticipated, marking a step towards building a cohesive national debt market that progresses steadily towards global standards in efficiency and liquidity, enhancing the UAE’s standing as one of the most stable and advanced economies in the region.
Fitch: Opens New Channels for Government Financing 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 represents a significant new step in developing the local debt market in UAE dirhams, opening doors for a broad segment of citizens and residents to invest in government financial instruments compliant with Islamic law, a category of investors that previously did not have access to such investment channels.
Al-Natour explained in statements that the debt market in the UAE historically began with dollar-denominated issuances, rather than dirham, by companies and banks. However, in recent years, there has been a growing governmental momentum towards developing the debt market in dirham.
With the expansion of issuances from bonds to sukuk aimed at institutions, the new initiative allows individuals to partake in government investment with a minimum amount starting at 4,000 dirhams, aiming to promote financial inclusion and widen the local investor base.
He mentioned that this initiative follows similar previous experiences in other countries such as Saudi Arabia, Malaysia, and Indonesia, which launched similar programs for individual sukuk, reflecting a global trend towards enabling citizens to invest in sovereign debt instruments through safe and regulated means, compliant with Islamic law.
He emphasized that the medium-term success of the initiative will help open a new financing channel for the government, provided it is accompanied by a public awareness campaign to educate new investors about the nature of these instruments concerning returns and risks, especially since this segment may not be accustomed to dealing with sovereign debt products.
Al-Natour pointed out that the initiative’s Islamic aspect enhances its inclusivity, drawing in those sensitive to investing in non-compliant instruments, while also attracting the other segment unconcerned with sharia compliance. He noted that some Islamic banks in the UAE see up to 50% of their clients as non-Muslims, reflecting a widened interest in sharia-compliant instruments and attracting varied sectors to the initiative.
Regarding the expected yield on sukuk, he stated that it is still early to judge as it will be determined after the issuance of regulations, the executive framework, and the launching of the offerings, which will specify the durations, yields, and structures. However, he affirmed that the new sukuk will constitute a significant addition to diversify individual investment portfolios, connecting them directly to secure government channels.
He also highlighted the importance of monitoring the initiative’s evolution in the near future, especially whether it would adopt the use of financial technologies (FinTech) in investment and trading operations, a crucial matter to facilitate individuals’ electronic participation or automated participation through banking applications or websites, rather than relying solely on traditional methods of distribution, investment, and trading within the secondary market.
He concluded his statement by emphasizing that the initiative targets an “underserved segment,” granting them, for the first time, the ability to invest in sharia-compliant sovereign instruments issued by the government, significantly enhancing the diversification of local financing markets and supporting the state’s vision of empowering individuals to engage in economic development.
Moody’s: Enhances Revenue for Islamic Banks through Fees and Commissions
Moody’s Ratings Agency believes 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 allowing individual investors to subscribe to Islamic-compliant government financial instruments will increase interaction between banks and individual investors, enhancing the UAE’s status as a developed hub for Islamic finance.
Moody’s predicts that the role of Islamic banks as intermediaries in subscription, custody, and trading operations will improve their non-funding revenues over the long term by increasing net fees and commissions. Furthermore, these banks will benefit from the increase in deposits resulting from subscriptions by individual investors, bolstering their short-term liquidity.
The agency stated that the initiative represents a strategic step to support the growth of the Islamic banking sector and expand the investor base in the local market, strengthening the robustness and sustainability of the UAE’s financial system.
On October 24, the UAE, which holds an (Aa2 with Stable Outlook) credit rating, announced plans to launch a new program for individual sukuk, allowing individual investors to invest in government-backed financial instruments compliant with Islamic law. It is expected that financial institutions will benefit from this initiative through diversifying their revenue sources while increasing interaction with individual investors and enhancing their liquidity levels.
Additionally, participating banks will act as intermediaries to facilitate subscription, custody, and trading of sukuk, yielding new fee-based revenues while aligning with the national policy aimed at developing the Islamic finance sector.
During the first half, 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%, outperforming their conventional counterparts, which recorded 1.8%, benefiting from a lower funding cost (3.1% versus 3.8% at traditional banks). Non-funding revenues constituted 35% of total operating income for Islamic banks during the first half of 2025, a figure close to that of traditional banks.
The agency anticipates that the launch of the individual sukuk program will support non-funding revenues in the long term, particularly through increased net fees and commissions, which contributed 18% to total operating income during the first half of 2025.
With individual investors subscribing to sukuk, participating banks are expected to benefit from increased deposits, which will enhance their short-term liquidity levels. By June 2025, liquid assets comprised 23% of total tangible assets held by Islamic banks in the UAE, a figure significantly lower than the 44% recorded for traditional banks.
This difference is attributed to the limited range of liquid instruments compliant with sharia. However, ongoing market developments may gradually contribute to expanding access to these instruments. The agency also expects that the initiative will help enhance the capital markets in the UAE, albeit slightly, by widening the investor base in local currency issuances to include individual investors.