Saturday, August 22, 2009

Bond with nation

This is a long interview about National Bonds in the UAE, mostly of interest to UAE residents. Posting this only for my record. Cheers.
The global downturn has reminded many of the importance of savings. With half a million people already opting for National Bonds, the Sharia-compliant savings scheme backed by the government of Dubai is proving to be alluring option. In fact, while the global economy has been witnessing a fiscal punch, the sale of National Bonds has been seeing an upward trend.
”National Bonds will continue to invest in projects that are safe and suitable and also look at launching new products. We will always look at opportunities that are good for National Bonds and for our bondholders. Being government-backed is itself a guarantee to the investor. The programme is based on the Islamic principle of Mudaraba, whereby at the end of the financial year 20 per cent of the profits made by the National Bonds Corporation will be distributed among bondholders,” revealed Bruno Rochecouste, Chief Commercial Officer, National Bonds Corporation PJSC, in an exclusive interview to The Gulf Today.
National Bonds awards 101 prizes every week, of amounts ranging between AED1 million, AED10,000, AED5,000, AED1,000 and AED500. This amounts to Dhs1,155,000 in total prize money awarded each week.
Details of the interview:

National Bonds achieved an impresssive annual profit rate last year despite the downturn. How do you foresee your results this year due to the current situation?
National Bonds returned an impressive profit rate of over 7 percent last year and over 6 percent in 2007 versus comparable savings schemes. Although it’s is not possible to determine in advance this year’s profit rate, the first half has been positive for National Bonds and we foresee this remaining as competitive in 2009 as it has been in the past.
What is the demographic profile of investors in National Bonds?
We have representation from all strata of society, people from all walks of life. At present people from over 91 nationalities constitute our customer base. As of July, UAE nationals hold 32 per cent of the bonds, Asian expatriates 20 per cent, Arab expatriates 20 per cent, Western expatriates 8% and others 12%. We have the high net worth customer, the middle income level and the low income level customers. We have individuals and corporates who have invested in National Bonds. We have people who have purchased bonds to the value of 100 dirhams, which is the minimum purchase of National Bonds, as well as those who have invested millions of dirhams in National Bonds. Institutes have by far been the customer segment that has seen major growth, registering a record 149% increase in 2008 over the previous year. We found that youth and women were neglected, for example by the banks. Our young bondholders grew by 50% and female bondholders increased by 40 % over the previous year.
What is National Bonds doing to encourage a culture of savings/investing?
National Bonds is the national savings scheme. So we consider it as our primary goal to promote a culture of savings in the UAE. National Bonds has stepped up its efforts to encourage people to save. We are on a major campaign in schools to help children understand the value of money and inculcate in them a lifetime habit of saving. For example, we have just launched the National Bonds School Achievement Program. This endeavour of National Bonds aims to educate students about the benefits of adopting good savings habits at an early age and motivate them to perform better, save further, get rewarded and overall, contribute towards the well-being of society. National Bonds is also a Support Partner in the “ Lets save for a Noble Goal Campaign” that was launched recently in Abu Dhabi as a part of the Royal Euro 2008 Football Charity Auction, which was organized by “Nahtam Social Responsibility” in association with the Swiss and Austrian Embassies. The saving campaign aims to instill the saving habit amongst children and create awareness about the importance of saving for themselves and for the less fortunate children. National Bonds is also continuing to become a favorite place to save thanks to a number of exciting initiatives introduced including our increase from monthly to weekly prize draws.
How do you secure the investment made by bondholders in the context of the current situation?
The fact that half a million people have decided to save with National Bonds is because they are secure in the knowledge that it is a safe, exciting and rewarding Sharia-compliant saving scheme. We are very careful in how we invest, as people have entrusted us with their lifetime savings. Our investments are protected. We are also backed by the government of Dubai and that should give enough encouragement and confidence to anyone who wishes to save with National Bonds. Being government-backed is itself a guarantee to the investor. The programme is based on the Islamic principle of Mudaraba, whereby at the end of the financial year 20 per cent of the profits made by the National Bonds Corporation will be distributed among bondholders.
With many expatriates leaving the country for good due to retrenchment, what kind of impact has this had on your customer base, and would this in anyway impact on your investment strategy?
Other than redemptions, which is a normal feature in a flexible scheme like ours, the customer base has not been affected. In fact, at present we have over a half million bondholders from over 91 different nationalities. Our investment strategy does tend to be more conservative – we focus on assets that are aligned with our commitment to providing a safe, secure and Shariah-compliant way for our bondholders to save. In 2009 National Bonds will continue to invest in projects that are safe and suitable and also look at launching new products. We will always look at opportunities that are good for National Bonds and for our bondholders.
You announced recently that you have moved to weekly draws (the draws being monthly before). Why did you decide to do this, and have you seen sales jump as a result?
The change in the draw format is aimed at encouraging more people to save and be rewarded. National Bonds hopes to fulfil the aspirations of many more bondholders and see even more “Millionaires” in the National Bonds family. This year, we are committed to increase the number of savers and hope the existing bondholders increase their bond value through numerous initiatives like the new draw format, and further expansion of the distribution network and introduction of innovative products and services. We have seen an encouraging trend in sales and are expecting a 100% growth by end 2009.
What is the differentiator of National Bonds, from other saving schemes?
National Bonds is the Sharia complaint savings scheme that offers bondholders a regular profit distribution at the end of every financial year combined with an opportunity to win weekly prizes offering a top prize of AED1 million. In addition, National Bonds announced the highest annual profit rate of 7.07% in the UAE on saving schemes for its bond holders for a second consecutive year in 2008. The company is largely owned by the Investment Corporation of Dubai and leading local entities like Emaar, Dubai Holding and Dubai Bank. The scheme also offers free to join and free to leave i.e. no additional charges on purchase and redemption transactions.
Some people compare National Bonds to a lottery. How would you counter this perception?
We are not a lottery. In a lottery some win and some lose their investment. National Bonds is a Mudaraba system where the capital is protected. You will get back your investment whenever you wish, plus you will get 20 percent of the profits at the end of the year. The aim of having weekly draws are two-fold – firstly it is a gesture from National Bonds to thank bondholders for putting their trust in our scheme and secondly it is to encourage people to invest more and become regular savers. Their savings are in safe hands, as we constantly strive to ensure a good return for all our bondholders.
Given that I have invested in bonds, what if I don’t win in any of your draws, what will I get out of my money?
If the bondholders do not get the opportunity to win in the weekly draws, they will still be entitled to the profit disbursed by National Bonds Corporation PJSC at the end of every financial year
Many customers feel that after the change from a monthly to a weekly draw format, they have lost out on the smaller prizes like AED 100, which some used to win regularly, also many of them don’t stand a chance to become a millionaire because this is limited to those who have invested AED 10,000 and above. Are you reviewing/revising your draw structure?
We are not planning to further revise our draw structure, as we have just launched it. However, we do review the format in terms of performance and delivery and we are quite happy with the progress made since we announced the weekly millionaire draws. We had revised the format after conducting studies and surveys with our focus groups and after receiving feedback from the majority of our customers. In addition to the top prize, bondholders still continue to win a range of other prizes including AED10,000, AED5,000, AED1,000 and AED500.
Why should people choose to save in bonds during the economic crisis?
In tough times people do tend to save for a rainy day. Frankly, the saving culture, as we know it in other parts of the world, does not exist in this region. National Bonds has taken the lead in encouraging people to save and promote a culture of saving in UAE society. This is why our sales went up quickly with the start of the global economic downturn.
People will save for different reasons - for their children’s education, to buy property, to get married, and so on. National Bonds has become the magnet for people who wish to save. We are committed to nurturing a savings culture by encouraging people to save in National Bonds.
What if a person has been terminated, how can he redeem the bonds from his home country?It’s very simple. If they wish to continue with National Bonds they just need to update their address, and mobile number through our call centers. If they win, they will get an SMS and the certificates will be sent to them by registered mail. In the same way, they can redeem the bonds as well.


  1. too long! I did not read it full! I want another nice little lovely post! Going back to Pune tomorrow - no more Flu vacations! Bah! See you sir :)

  2. I was here....baapree,high funda post.Namaste.

  3. Glad to see that you're feeling better and back to having interest in life and work! I'm back to my routine too. Take care,R. <3

  4. Okay, I confess - I did not read this one. Loved the Gavaskar and Khanna posts :)

  5. Quite a long post by your standards ramesh..I am the one known for her rants..I look forward to your short and crisp posts..and now this..but I read it completely..

  6. its tooooooooo long to read it..... Gavaskar post is very coool...


  7. Its toooooo long to read. Gavaskar post is very cool.


  8. I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to

    say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.