More UAE residents buying bonds; regular savers now hold nearly Dh500 million in their accounts, reports National Bonds

Dubai: The value of savings held in bonds has been on the rise, as more UAE residents turn to other financial instruments outside the traditional bank accounts to grow their income and take advantage of better interest rates.

As of the end of 2018, savers in the country had Dh448.8 million sitting in National Bonds, up by 18 per cent from just Dh381.7 million in the previous year.

Thousands more people joined the investment scheme over a 12-month period, with the number of regular savers surging by 14 per cent to hit 35,800 accounts. Men represented the biggest jump in the number of savers, although more women and minors also started investing in bonds.

With more people snapping up bond certificates, National Bonds saw the value of assets under its management grow to Dh7 billion in 2018. When corporate and individual savers are taken into account, the company now has a total of 480,000 customers.

Bonds appeal to savers as they offer higher returns compared to bank accounts, which typically carry very low interest rates.

Banks in the UAE currently pay between zero and 0.6 per cent for accounts with less Dh3,000. Better interest rates, however, are being offered to those who can maintain higher balances for a fixed period, say, six months or two years, with rates reaching as much as 2.25 per cent.

Financial experts, however, warned that while bonds offer higher financial returns, they carry some risks. The value of one's savings can go up or down, much like stocks.

National Bonds noted that the number of minor savers holding bonds increased by 12 per cent last year compared to 2017, while accounts held by women jumped by 13 per cent. Men’s accounts increased by 14 per cent. 

The company, owned by Investment Corporation of Dubai, the investment arm of Dubai government, distributed annual revenues of 2.06 per cent among bondholders with at least Dh50,000. Those who hold bonds of Dh150,000 or above received a bigger payout of 2.9 per cent, while savers with at least Dh350,000 in their accounts were rewarded a 3.52 per cent return.

“The increasing number of savers reflect the increased awareness and the spreading popularity of a savings culture,” said Mohammed Qasim Al Ali, chief executive offer of National Bonds.

Citing their latest Savings Index Report of 2018, Al Ali noted that there are more people in the UAE than in other GCC countries who believe in the power of saving money.

“The report shows that more than 52 per cent of the respondents have a positive view on saving in the UAE,” said Al Ali.

The company also reported that the value of assets under its management went up by about six per cent to hit Dh7 billion. By the end of 2018, the company had 480,000 individual and corporate customers.