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Table 4.11: Recommendations to Improve Demand (Buy Side) – Medium-Term Solutions
Issues and challenges Demand (buy side) opportunities
Narrow investor base – Foreign-
dominated investor base; lack of
cornerstone institutional investors;
no retail investors
Demand from institutional investors that need long-term
investments, such as insurance companies and pension
funds.
Demand from high-net-worth individuals who are now
investing more in equities and real estate. A retail market
would create depth for the ICM.
Unavailability of centralized Shariah
authority
The standardisation of legal documentation, sukuk
structures and Shariah rulings would create more
certainty among investors, hence create more demand
for sukuk.
To improve clarity on investor protection, to avoid
recurrence of Dana Gas-type events.
Sukuk issued have average
maturities of 5-7 years
The capital market allows intermediation of long-term
funds to match the funding of long-term financings, such
as in project financing or infrastructure development
projects.
Federal governments and GREs to raise sukuk with
different maturities and more frequently, to provide the
necessary benchmark yield curves that would enable
local corporations to raise longer-term issues.
Sources: RAM, ISRA
Table 4.12: Recommendations to Improve Supply (Sell Side) – Medium-Term Solutions
Issues and challenges Supply (sell side) opportunities
Limited LCY domestic sukuk
market
Federal government and Emirates’ governments to finance
their budget deficits, especially when oil prices drop.
Limited Islamic money-market
instruments such as short-term
sukuk, Islamic treasury issues
The Islamic banking industry is growing in the UAE, but
there is a lack of liquidity-management instruments,
particularly high-quality and liquid financial assets to meet
the liquidity coverage ratio under Basel III.
The central bank is able to strengthen its monetary policy.
Sources: RAM, ISRA