The UAE Ministry of Finance and the UAE Central Bank announced the results of the auction of dirham-denominated Islamic treasury sukuk (T-Sukuk). The value of the auction amounted to AED2.8 billion and oversubscription grew 3.35 fold, reaching AED9.39 billion, according to a tweet published by the ministry.
T-Sukuk are dirham-denominated, Islamic Sharia-compliant financial instruments issued by the federal government. Their primary objectives are to support the establishment of a dirham-denominated Sukuk capital market and to tap the growing global Sukuk market. They also raise funds for the federal government from a broad base of local and global investors. Moreover, T-Sukuk offer liquidity to finance strategic development programs and projects. Finally, they cement the UAE’s position as a global investment hub and lucrative investment destination in the Islamic economy.
Dirham-denominated T-Sukuk also help diversify funding sources and minimize dependency on the foreign capital markets. They expand the investor base for local currency sukuk which helps reduce exposure to rollover and foreign exchange fluctuation risks. Additionally, they provide local investors with an opportunity to invest in local government securities in the UAE dirham. Furthermore, T-Sukuk provide alternative financing resources for the private sector, banks, and financial institutions in the UAE.
T-Sukuk Investment process
Islamic T-Sukuk are asset-backed Islamic Sharia-compliant financial instruments whose profits and payment at maturity mainly rely on the performance of the issuer’s assets. Purchasing T-Sukuk means lending the federal government an agreed amount of money for a specific period. In return, the investor receives periodic profit payments from the government. Then, the government fulfills its debt obligation once the sukuk reaches its maturity date.
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