The chief executive of National Bonds, the Dubai-government backed saving scheme that has over Dh7 billion of assets under management, expects to attract more savers in 2018 thanks to higher interest rates and a weak dollar, and plans to offer financial advisory services later this year.
"We are seeing now a consistent increase in interest rates, led by the Fed in America, based on the improvement of the US economy," Mohammed Al Ali told The National on Wednesday in a telephone interview.
"This is a blessing for investment companies like us because it means we are getting more profits and we are able to give our savers competitive returns."
The UAE monetary policy follows that of the US Federal Reserve, given the dirham’s peg to the US dollar. The Fed cut rates to historic lows following the global crisis of 2008, but began tightening policy from late 2015. Due to an improvement in the fortunes of the US economy, the Fed expectes to raise rates three or four times this year.
The prospect of higher interest rates in the UAE, combined with the significant weakening of the US dollar since the start of the year, has made it more attractive to keep money in the UAE instead of converting it to euros or sterling.
As UAE rates interest rise, National Bonds plans to offer financial advisory services later this year to offer tailor-made financial planning and investment advice using a mix of software and financial advisers, Mr Ali said.
A gap exists for such services in the UAE, especially ones that are low cost and transparent, he said.
Mr Ali said that National Bonds was stepping up efforts to instil a culture of savings in the UAE, a country that is often associated with conspicuous consumption.
The company is also promoting financial literacy education in the country, he said, admitting the low levels of understanding of money concepts (including the definition of bonds) are a barrier to growth.
"We are trying to educate people and allow them to focus on their financial planning, their budgets by sticking to a savings plan," said Mr Ali.
"We almost stand alone among the crowd that we encourage savings versus borrowing. Most of the other institutions are encouraging debt but we are encouraging savings, regular savings."
The UAE government has in recent years been looking at ways to encourage employees to save more, and to offer plans that companies make contributions to alongside any savings that are made by individuals, Mr Ali said.
He also noted how end of service gratuities - the end of job bonuses given to employees in the UAE by employers - would boost the economy if they could be used as collateral for lending products such as mortgages.
"Imagine if this liquidity is injected into the local economy," he said. "It will have a huge, huge knock on effect on the growth ratios in the UAE economy."
Despite what the company's name suggests, National Bonds invests across a diverse asset portfolio. While 63 per cent of its investments are in money market funds and Islamic bonds, the company invests between 25 per cent to 30 per cent of its assets in rental generating real estate and 8 per cent in listed equity.
Mr Al Ali also said that the firm invests in private equity but didn't specify the percentage. The size of National Bonds assets has grown between 3 per cent and 4 per cent per annum in recent years, he said.