The Abu Dhabi Islamic Bank (ADIB) headquarters. — Supplied photo
Presently, the sukuk (Islamic bonds) market mandates a minimum investment of $200,000, which experts argue is a significant barrier for retail investors and restricts market growth. Abu Dhabi Islamic Bank (ADIB), a prominent Islamic financial institution, aims to dismantle this barrier by piloting fractional sukuk technology in a secure setting to make sukuk investments more accessible to retail clients.
On Tuesday, ADIB announced it has secured preliminary approval from the Regulations Lab under the UAE government, supervised by the Securities and Commodities Authority (SCA). This endorsement underscores the UAE's leadership in technological innovation and financial services. With fractional sukuk and the initial approval granted to ADIB, retail investors can invest as little as $1,000, unlocking the advantages of fixed-income financial products. This initiative introduces a novel investment avenue, enabling customers to engage in a new asset class with minimal investment.
The agreement aims to establish a comprehensive legislative framework to test fractional sukuk technology, which digitally segments a sukuk into smaller units, allowing individual investors to pool resources for purchasing fractional shares of typically high-cost corporate sukuks without substantial capital. Once operational, it will be the region's first fractional sukuk, empowering investors to construct a bespoke sukuk portfolio with a minimum investment of $1,000.
Mohamed Abdelbary, ADIB Group CEO, stated: “Sukuks are a valuable asset class adhering to Islamic finance principles, and we aim to make them more accessible to retail investors. As part of our 2035 vision to be the world’s most innovative Islamic bank, we are collaborating with FinTechs to pioneer initiatives that cater to evolving customer needs. We are thrilled to partner with the Regulations Lab, the Securities and Commodities Authority, and relevant authorities to test and launch this digital asset. We anticipate the product's development and refinement to better align with our customers’ needs and values.”
The collaboration among these entities aims to provide flexible laws and regulations for testing fractional sukuk, ensuring high safety standards in applying new technologies and mitigating risks during experimental phases. This fosters a secure environment for technological advancement and expedites the development and market availability of fractional sukuk.
Upon testing and launch, customers can craft a personalized Sukuk portfolio with a minimum investment of $1,000, tailored to their risk tolerance, preferred sectors, and maturity periods. This enables them to choose Sukuk based on desired returns, credit ratings, and other criteria influencing their investment decisions.
Source link: https://www.khaleejtimes.com
