Federal Debt Management Office
T-Sukuk: Local Currency Islamic Sukuk Issuance
With the UAE’s thriving economy and strong credit standing from major international rating agencies, the Islamic T-Sukuk issued by the federal government offer opportunities for local, regional, and global investors who are looking to diversify their investment portfolio.
Legal Disclaimer: Not for distribution, directly or indirectly, in or into the United States
Objective
T-Sukuk are Islamic Sharia-compliant financial instruments issued by the federal government of the UAE denominated in the Emirati Dirham (AED). The primary objectives of local currency Islamic Sukuk issuance is to:
- support the establishment of a Sukuk capital market in local currency and to tap the growing global Sukuk market,
- raise funds for the federal government from a broad base of local and global investors,
- offer liquidity to finance strategic development programs and projects, and
- cement the UAE’s position as a global investment hub and lucrative investment destination in the Islamic economy
Local currency Sukuk issuance will help diversify funding sources and minimise dependency on the foreign capital markets; expand the investor base for local currency Sukuk which helps reduce exposure to rollover and foreign exchange fluctuation risks; provide the local investors with an opportunity to invest in local government securities in the UAE dirham; and provide alternative financing resources for the private sector, as well as banks and financial institutions in the UAE.
T-Sukuk Process
Islamic T-Sukuk are asset-backed Islamic Sharia-compliant financial instruments whose profit and payment at maturity mainly rely on the performance of the issuer’s assets. Purchasing T-Sukuk means lending the federal government (Sukuk issuer) an agreed amount of money for a specific period of time. In return, the investor (Sukuk holder) receives periodic profit payments from the government. The Sukuk issuer fulfils its debt obligation once the Sukuk reaches its ‘maturity date’ or the date on which the Sukuk’s principal amount, known as the ‘face value’ or ‘par value’, must be paid in full.
01
Issuance of T-Sukuk
The government issues T-Sukuk. The investor subscribes to the issuance and purchases the Sukuk’s issue price
02
Profit payment to investors
The government makes periodic profit payments to the investor
03
Repayment of face value
When the Sukuk reaches maturity, the government repays the face value, including outstanding profit
The below diagram illustrates some of the structural aspects and cashflows of the Sukuk offering:
Benefits of building a yield curve in dirham for the UAE economy
Ability to cover future funding needs in own currency
An actively traded government Sukuk market contributes to efficient pricing and capital allocation
An active government securities market develops capital market and provides safe investment assets
Provides opportunities for foreign investors to invest in local currency
Frequently Asked Questions
To provide further information about the UAE government Islamic T-Sukuk, we have gathered the most frequently asked questions for your reference.
It is an Islamic Sharia compliant security denominated in AED that constitutes a Public Debt Instrument within the meaning of the Issuing Law.
The objective is to develop the local dirhams debt market, to build a local currency yield curve, and contribute to building a local currency Sukuk market.
The Government of the United Arab Emirates, acting through the Ministry of Finance of the United Arab Emirates.
The Islamic T-Sukuk will be initially issued for 2 year, 3 year and 5 year maturity. This will be followed by 10 year maturity at a later date.
The profit rate will be fixed (determined by the bids at the auction) and profit payment will be semiannual.
The Islamic T-Sukuk are sold at auctions, planned to be held once every six-eight weeks. For specific dates, see our Tentative Auction Issuance Calendar published on our website, which shows auction dates in advance.
Tenders will only be open to Primary Dealers. Other Eligible Investors wishing to participate in an issuance of Islamic T-Sukuk must do so through a Primary Dealer.
Eight recognized domestic and international banks have been appointed as Primary Dealers. They have exclusive right to participate in the competitive tenders of the primary offer and would provide liquidity and price transparency in the Secondary Market.
Any natural or legal person (other than a person subject to sanctions restricting its ability to purchase Islamic T-Sukuk or similar instruments).
The issuance plan is in line with the medium-term debt strategy covering the next 3 fiscal years.
The proceeds from the issue of the Islamic T-Sukuk will be applied by the Issuer in accordance with the Issuing Law (UAE Decretal Federal Law No (9) of 2018, Regarding Public Debt).
By visiting the website and additionally by reaching out to federaldmo@mof.gov.ae
Yes, to build up the size of individual Islamic Sukuk issues over time and to improve liquidity in the secondary market.
Denomination is AED 100,000; custody services is through i-link Euroclear; electronic auction platform used is from Bloomberg and hosted by the Issuing Agent (Central Bank of UAE); to ensure wide distribution, no single Primary Dealer allotted more than 45% of successful bids.
