UAE to sell first dirham T-sukuk worth nearly $300m

The UAE will sell AED1.1 billion ($299.6 million) of Islamic treasury sukuk (T-sukuk) for the first time in the local currency, state-run WAM news agency reported.

The T-sukuk will be issued with tranches maturing in two, three and five years, followed by a 10-year bond at a later date.

Mohamed bin Hadi Al Hussaini, minister of state for financial affairs, said the UAE is keen to build an investment infrastructure to boost the Islamic economy as one of the key pillars of the national economy.

T-sukuk are sharia-compliant financial certificates and will be traded to reflect the local return on investment and support economic diversification and financial inclusion, he added.

The issuance in local currency will contribute to building a local currency bond market, diversifying financing resources, boosting local financial and banking sectors and providing safe investment alternatives for local and foreign investors.

Khaled Mohamed Balama, governor of the Central Bank of the UAE, said the Islamic treasury sukuk will help develop local sukuk markets, diversify financing resources and strengthen the infrastructure to support investment options and alternatives, which are compatible with Shariah provisions.

Further, the issuance will contribute to implementing the new dirham monetary framework and support the ongoing work to establish the dirham risk-free pricing benchmark (yield curve), which would stimulate more domestic market activities to support the sustainability of the economic growth, the governor said.

The finance ministry has onboarded eight banks, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Abu Dhabi Commercial Bank, Emirates NBD, First Abu Dhabi Bank, HSBC, Mashreq and Standard Chartered as primary dealers to participate in the T-sukuk auction.

Bashar Al Natoor, global head of Islamic finance at Fitch Ratings, said issuing dirham-denominated T-sukuk was an important step to enabling the development of the nascent domestic debt market.

“The T-sukuk would give Islamic and conventional banks an option to invest their liquidity. It could also help open the way for corporates and financial institutions to issue dirham-denominated bonds and sukuk.”

The local currency sukuk could provide smaller issuers that are unable to access international debt markets with an alternative way to raise funds, Al Natoor noted.