Abu Dhabi Islamic Bank (ADIB) recently announced that it has successfully tested the fractional sukuk technology in a safe environment to make sukuk investing more accessible to retail customers. This came after the bank received the initial approval from the Regulations Lab within the UAE government under the supervision of the Securities and Commodities Authority (SCA). The implementation of fractional sukuk technology supports the UAE’s leading position as a global hub for technological innovation and financial services.
Greater access to retail investors
Currently, accessing the sukuk market requires a minimum investment of $200,000. However, with ADIB’s fractional sukuk, retail investors will be able to invest as little as $1,000, giving them access to the benefits of fixed-income financial products.
This presents a new investment opportunity for customers, allowing them to invest in a new asset class with smaller investment amounts. This cooperation also aims to provide a set of flexible laws and legislation to conduct tests on fractional sukuk, ensuring the highest levels of safety and risk mitigation in applying new technologies and avoiding risks that arise during the experimental phases. With that, ADIB will foster a secure environment for technological advancement. In addition, it will accelerate the development and market availability of fractional sukuks.
ADIB is partnering with the Regulations Lab, the SCA and the relevant authorities to test and launch the fractional sukuk.
Comprehensive legislative work system
Under the agreement with UAE authorities, ADIB will establish a comprehensive legislative work system to test the fractional sukuk technology. The technology digitally divides a sukuk into small portions and allows individual investors to pool their money into buying fractional shares of typically expensive corporate sukuks without needing significant capital. Once launched, it will be the first fractional sukuk of its kind in the region, enabling investors to build a tailored sukuk portfolio with a minimum investment of $1,000.
“As part of our 2035 vision to become the world’s most innovative Islamic bank, we are forging ground-breaking new partnerships with fintechs to deliver pioneering initiatives to meet the evolving customer needs,” stated Mohamed Abdelbary, ADIB group CEO.
Once ADIB tests and launches the fractional sukuk, customers will be able to create a custom sukuk portfolio with a minimum investment threshold of $1,000. Investors can also tailor their portfolios to align with their risk tolerance, preferred sectors, and maturity periods. This allows them to select sukuk that align with the returns they are looking for. Moreover, it allows them to choose according to credit ratings and other criteria that help guide their investment decisions.
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