UAE announces launching Domestic Dirhams Islamic Treasury Sukuk (T-Sukuk) with size of AED 1.1 billion

26 April 2023

The United Arab Emirates, represented by the Ministry of Finance (MoF) as the issuer and in collaboration with the Central Bank of the UAE (CBUAE) as the issuing and paying agent, has announced launching a dirham- denominated Islamic Treasury Sukuk (T-Sukuk), with a benchmark auction size of AED 1.1 billion.

His Excellency Mohamed Bin Hadi Al Hussaini, Minister of State for Financial Affairs, reaffirmed the UAE’s keenness to strengthen the Islamic economy and build a pioneering investment infrastructure to boost the Islamic economy as one of the key pillars of the national economy.

His Excellency Al Hussaini said: “The Ministry of Finance cooperates with all its partners, foremostly the Central Bank of the UAE, to attract investments and deploy them in Islamic economy channels. The T-Sukuk are Sharia-compliant financial certificates, and they will be traded to reflect the local return on investment, support economic diversification and financial inclusion, as well as contribute to achieving comprehensive and sustainable economic and social development goals.”

Additionally, His Excellency emphasised that issuing the T-Sukuk in local currency will contribute to building a local currency bond market, diversifying financing resources, boosting the local financial and banking sector, as well as providing safe investment alternatives for local and foreign investors. His Excellency also noted that this issuance will help build the UAE Dirham-denominated yield curve, thereby strengthening the local financial market and developing the investment environment.

His Excellency Khaled Mohamed Balama, Governor of the Central Bank of the UAE, also emphasised the importance of issuing Islamic treasury sukuk in developing local sukuk markets, diversifying financing resources, and strengthening the infrastructure to support investment options and alternatives that are compatible with the provisions of Islamic Sharia, in a way that contributes to the development of the Islamic financial sector, improves the investment environment, and solidifies the UAE’s position as a leading global hub in the Islamic finance sector.

His Excellency added: “The issuance of Islamic treasury sukuk comes within the framework of the UAE’s commitment to developing capital market activities and consolidating its position as a global financial hub. This issuance reaffirms the strength and stability of the financial system and the confidence of local and international investors in the UAE’s ability to develop the financial sector in accordance with monetary policies and strategic plans.”

In addition to this, His Excellency said: “With the development of an effective infrastructure for the financial markets, we are confident that this issuance will contribute to supporting the market for bonds denominated in the local currency and issued by the public sector in the country. It will also enhance the competitiveness of the local financial markets and enable market participants in the UAE to maintain a single, transparent, diversified and sustainable liquidity pool in Dirhams. Furthermore, it will contribute to the implementation of the new Dirham Monetary Framework (DMF) 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 country’s economic growth.

The T-Sukuk will be issued initially in 2/3/5-year tenures; followed by a 10-year sukuk at a later date and will be denominated in UAE dirhams to develop the local bonds debt market and help develop the mid-term yield curve.

The Ministry of Finance and the Central Bank of the UAE work with relevant government entities and international financial bodies to ensure best practices were followed when structuring the T-Sukuk. This allows for further development of Islamic finance in the country and cements its position as an international Islamic economy hub.

The structuring of Islamic Sukuk has been approved by the Higher Shari’ah Authority at the CBUAE, which cooperates with the relevant authorities to standardise and unify the practices of Islamic financial institutions to be compatible with internationally recognised Shariah standards and best practices.

The Ministry of Finance has published a robust Primary Dealers code and onboarded eight banks namely Abu Dhabi Islamic Bank (ADIB), Dubai Islamic Bank (DIB), Abu Dhabi Commercial Bank PJSC (ADCB), Emirates NBD, First Abu Dhabi Bank (FAB), HSBC, Mashreq and Standard Chartered as Primary Dealers to participate in the T-Sukuk primary market auction and to actively develop the secondary market.

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