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conventional and Islamic banks4 in April 2014, to strengthen liquidity management by
domestic Islamic banks, would also help boost sukuk issuance. Since April 2015, the Shariah-
compliant IMLF has recognised a borrower’s holdings of sovereign sukuk or sukuk issued by
authorities in any of the emirates as collateral.
Domestic Market – Private Sector Issuance
Similar to public sector issuance, LCY domestic sukuk by corporates in the UAE is also very
limited. Instead, the UAE sukuk market is very well known for its Eurobond market. Based on
data from Blomberg (as at end-June 2017), only 10 LCY issues had been raised, mainly by
companies involved in real estate. Most GREs, which have been a major source of growth and
development for the UAE economy in Dubai and Abu Dhabi, tend to source their funding
externally to supplement their domestic borrowing, which is highly dependent on bank
loans/financing. The tendency to source external funding could be due to the absence of a
long-term benchmark domestic yield curve. A similar trend can be observed for UAE national
banks. According to the UAE Financial Stability Report (2016), the share of non-resident
funding to total funding of UAE national banks increased from 17.6% in 2015 to 19.6% in
2016. Non-resident funding is split almost equally between capital market funding and non-
resident deposits. External capital market funding of UAE national banks advanced 19.1% in
2016, from 16.2% in 2015, partly underpinned by the shallow domestic bond market (refer to
chart 4.23).
Chart 4.23: UAE National Banks’ Non-Resident Funding to Total Funding
Source: CBUAE (2016)
Compared to conventional bonds, sukuk issuance by corporates and quasi-government entities
in the UAE has declined significantly since 2009, partly due to major sukuk defaults by Dubai’s
4 The Shariah-compliant IMLF is based on collateralised murabahah. Refer to Guidelines for Collateral Management under the
CBUAE’s Collateralized Murabaha Facility, published on 1 April 2015.