The Ministry of Finance in the United Arab Emirates (UAE) has announced its plans to issue Sukuk, an Islamic financial certificate, denominated in dirhams. The move is part of the country’s efforts to diversify its financial instruments and strengthen its position as a leading global financial hub.
The Sukuk is a form of Islamic bond that adheres to Islamic finance principles, which prohibit interest-based transactions and promote profit and risk-sharing between investors and issuers. Sukuk has become an increasingly popular financial instrument, especially in the Middle East and Southeast Asia, where Islamic finance is widely practiced.
The Ministry of Finance has not disclosed the amount of the Sukuk to be issued, but it is expected to be a substantial amount given the strong demand for Islamic financial instruments in the region. The Sukuk will be denominated in dirhams, the official currency of the UAE, which will make it more accessible to local investors.
According to the Ministry of Finance, the Sukuk will be issued through a special purpose vehicle (SPV) that will be established solely for this purpose. The SPV will be responsible for the issuance and management of the Sukuk, while the Ministry of Finance will act as the guarantor of the Sukuk.
The Sukuk will have a maturity period of five years, and it will be tradable on the Abu Dhabi Securities Exchange (ADX) and the Dubai Financial Market (DFM). The Sukuk will also be open to both individual and institutional investors, including banks, investment companies, and pension funds.
The Ministry of Finance has stated that the Sukuk issuance is part of its strategy to diversify its financial instruments and tap into the growing demand for Islamic finance products. The Ministry aims to position the UAE as a global leader in Islamic finance and attract more investment into the country.
The UAE has been at the forefront of the Islamic finance industry, with Dubai and Abu Dhabi ranking among the top 10 global Islamic finance centers. The country has a robust regulatory framework for Islamic finance and has established several institutions to support the growth of the industry.
The issuance of Sukuk is also expected to support the country’s economic growth by providing financing for various infrastructure and development projects. The Sukuk market has been growing steadily in recent years, with several countries and companies issuing Sukuk to fund their projects.
The UAE has previously issued Sukuk in international markets, with the last issuance taking place in 2019, when the country issued $2 billion worth of Sukuk. The issuance was oversubscribed, indicating the strong demand for Islamic finance products.
The Ministry of Finance has stated that the Sukuk issuance is part of its efforts to support the UAE’s economic recovery from the impact of the COVID-19 pandemic. The pandemic has had a significant impact on the country’s economy, with several sectors, such as tourism and aviation, being hit hard.
The Sukuk issuance is expected to provide a stable source of financing for the government, which can be used to support the country’s economic recovery and fund various development projects. The issuance will also provide investors with a stable and attractive investment opportunity, given the current low interest rates environment.
The UAE has been taking several measures to support its economic recovery from the pandemic, including the introduction of various stimulus packages and the acceleration of economic reforms. The country’s diversified economy and strong fiscal position have also been instrumental in mitigating the impact of the pandemic.
In conclusion, the Ministry of Finance’s plan to issue Sukuk denominated in dirhams is a significant development for the Islamic finance industry in the UAE. The issuance is expected to support the country’s efforts to diversify its financial instruments, strengthen its position as a global financial hub, and support its economic recovery from the impact of the pandemic.
