Dubai: National Bonds has announced it is distributing annual returns of up to 4 per cent to its thousands of savers for 2014, higher than what most deposit accounts are rewarding bank customers in the UAE.
The company has noticed an increase in the number of UAE savers who have put their money in bonds over the last year, but it said a lot still needs to be done to encourage more residents to get serious with their finances.
The company’s savings index launched at the end of 2014 had showed that only two out of 10 UAE residents are able to save regularly, while credit card spending remains on the rise. According to National Bonds, UAE consumers spent Dh11 billion on their credit cards in 2013 alone.
“There is still a lot of work to be done to turn saving into a lifestyle practice in the UAE,” said Mohammed Qasim Al Ali, CEO of National Bonds.
“A large portion of the UAE’s citizens and residents are yet to reach a level of financial maturity that provides them with stability and protects them from increasing dependence on debts and loans,” he added.
National Bonds’ 4 per cent profit rate, however, does not benefit all customers, as total actual returns vary, depending on the amount of money saved.
Those who have at least Dh100,000 saved in bonds enjoy 2.36 annual returns, while savers who have maintained Dh10,000 and below are entitled to only 1.44 per cent annual returns.
National Bonds explained that it is offering a three-year “step-up bonds” that provide customers a chance to earn an annual profit rate of 4 per cent.
National Bonds has been considered a better alternative savings option for people looking to grow their income. Banks in the UAE, like most financial institutions in other markets, offer meager returns on people’s savings.
As of 2014, the company achieved a 7 per cent increase in the number of customers, which have so far reached 786,000 individuals from 200 nationalities.
“These customers enjoy the benefits of National Bond’s accounts such as building a substantial saving for the future, receiving competitive annual returns from the investment portfolio, and enjoying prizes and rewards that are offered by the company to all customers [through daily weekly and monthly prize draws],” the company said in a statement.
The company sets aside a huge portion (94 per cent) of its investments within the UAE to help “support the local economy and boost social and economic development” in the country.
Preeti Bhambri, managing director of MoneyCamel.com, said that National Bonds is a good investment product for those who are able to maintain savings worth Dh50,000 to Dh100,000 for at least a year.
She noted that not every National Bonds saver receives the highest profit rate and the amount of return depends on a number of conditions.
The company's "Step Up Bonds" product, for example, which offers 4 per cent profit, requires a minimum investment of Dh50,000 and savers who opt for this are not eligible for prize draws.
The same product offers 2 per cent interest at the end of one year and 3 per cent at the end of two years. This also requires a "lock-in period" of 90 days.
"The other popular product they have is one-year Term Bond. The expected profit for this product is 2.5 per cent per annum. The condition to earn 2.5 per cent are minimum investment amount of Dh100,000 and non-eligibility for prize draws," she said.
