National Bonds targets sales of Dh12 billion by end of 2010

Mohamed Qasim Al Ali says the main focus of National Bonds is to promote awareness of saving among women and students (PATRICK CASTILLO)

Setting an ambitious target for itself, the National Bonds Company is aiming for sales of Dh12 billion by the end of 2010. This would entail a sales growth of 100 per cent annually over the next three years.

The company's total bonds sales at present amount to Dh2.8bn and, according to Mohamed Qasim Al Ali, CEO of National Bonds, the figures will exceed Dh3bn by the end of the year. His main goal during the next few months is to reach agreements with Islamic banks in the country to accept the bonds as a cash instrument to benefit bondholders, including individuals and corporations. With a conservative Shariah-compliant investment portfolio, Al Ali sees National Bonds as a major player in basic infrastructure projects in three main sectors: real estate, education and healthcare.

Despite the company being less than three years old, he is confident that National Bonds will turn out to be a global player. It has plans to open subsidiaries in several Middle Eastern and Asian countries. In an exclusive interview with Emirates Business, Al Ali spoke about the achievements of the company in its short life so far and outlined its future plans.

How has National Bonds' performance been so far?

In January this year we distributed a 6.03 per cent dividend to our clients, double that of any other savings scheme in the country. This earned us great support from the market, which was clear in the rapid bond sales during the past five months, reaching Dh1bn. As a result, our total sales increased to Dh2.8bn. Also, our clients increased from 380,000 in December last year to 425,000 in May this year, a 21 per cent rise. And our total investment volume increased by 58 per cent.

However, the Dh2.8bn sales is only the nominal value of the bonds, while their market value exceeds Dh5bn because the value of our investments, especially in the property sector, are appreciating fast. If you look at the current market value of the Sky Courts project, it has reached Dh1.4bn. Also, the Flamingo Creek project has reached Dh750 million. We are also studying several other property projects.

What about areas of investment and ensuring transparency for bondholders?

Transparency is a very integral part of our strategy –we have already issued the annual results of our company. We are also planning to issue quarterly results, similar to any listed company, to ensure transparency to our clients. But this will take time because the company is still new.

We recently hired a chief investment officer who will take care of risk management, ways to invest our capital in future projects and how to add variety and spread our current investments. However, our Shariah Advisory Board has set up a conservative investment strategy based on limiting our direct investments to 60 per cent of the total assets, while the other 40 per cent should be managed on cash basis to cover redemptions and give us a chance to pay for any new deals.

Direct investments include 15 per cent in private equity, IPOs and investments in international Shariah-compliant funds. The rest is focusing on the UAE property sector at the current stage. Also, we have a 16 per cent stake in Taaleem Company, which is running schools in the country. Our properties and schools are on the ground now and this gives us more credibility. Regarding the healthcare sector, we are still in the study stage and are negotiating with a global healthcare provider to run our primary healthcare centres. We plan to open the first five centres in Dubai early next year, at an initial cost of Dh100m during the first 12 months.

Why you are focusing on these three areas of investment?

The government's strategy aims to provide basic infrastructure services in different residential areas in the country, but it cannot provide all services at once. So we are investing in education and healthcare. Everyone in the community needs these services, regardless of low income, medium or high net worth individuals. With this investment strategy we can serve all parties, the community, our bondholders and the National Bonds Company itself.

What is the impact of the consumer trend on the expansion of National Bonds?

This is a critical issue, because saving is a lifestyle habit. And this is why we are carrying out awareness campaigns in schools and shopping malls. We in the UAE community are accustomed to spending and being supported by our parents and family, but with the increasing inflation and cost of living, younger generations should change their habit and learn how to save for the future.

We carried out surveys recently on our clients that brought out very important facts about the saving trends in the UAE. We found that 16 per cent of our customers are in the age category of 16 to 25 years, while the majority, 45 per cent, is in the age category of 25 to 40 years. Also, we found that one-third of our clients are females, which is quite an encouraging percentage. About 50 per cent of the community is female and women are increasingly entering the job market, which means that they are earning and can save.

So our main focus is to promote awareness of saving among women and students. Through these campaigns, National Bonds wants to become everyone's favourite to save as our scheme is very simple and suits all categories in the community. Another important point revealed by our surveys is that 60 per cent of our clients bought the bonds for saving purposes and not for the prize draws.

What are other categories you are targeting in the community?

We have ambitious plans to increase our corporate customers. We are negotiating with a large number of firms to invest the end-of-service and gratuity money of their employees in our savings schemes. We are offering them ways to invest these accounts and their employees can benefit from both the profits and the chances to win prizes. We have 80 companies in this scheme and we expect to increase their number to 500 in the next 12 months.

We have seen that the process of issuing and redeeming bonds is a lengthy one.

We are planning major changes in our customer services division in the next few months to improve these areas. We will launch a new system called Mudarabah, which will allow issuing the bonds immediately at our outlets in the country to replace the current system that needs two weeks to issue the bonds.

We will also launch another service called Dial Up Bonds where clients will be able to call a number and our sales representatives will visit them at home or in their workplace with all required documents.

For the redemption side, we are in serious negotiations with Islamic banks in the country to allow the redemption of our bonds. Currently, the redemption process is through the Emirates Islamic Bank with a limit of Dh10,000 per day per account, so we plan also to increase the redemption limit. We expect to reach an agreement soon with other banks. But the major issue is that we do not charge for issuing or redemption of bonds while banks always charge for such services.

What other plans does National Bonds has for this year?

We are negotiating a very critical issue for our clients with Islamic banks in the country, which is accepting National Bonds as a cash equivalent instrument. In developed financial markets this is a common and well-accepted process.

I hope we can reach an agreement with the banks very soon, especially since the UAE Central Bank has already approved using the bonds as cash equivalent. This will help all our clients, individuals or corporate. Our individual clients will be able to use the bonds for pledging purposes, to buy a property for example. They will not need down payments and will, instead, offer the bonds as cash equivalent for the banks to finance the property. Our corporate clients will be able to get financial facilities from banks using the bonds as cash guarantees.

Also, this month we started studying investments in Takaful, or Islamic insurance. In fact, the idea was suggested by our clients during our surveys. They were asking for more Shariah-compliant savings schemes. We are still in the very early stages, but we have two options – to tie up with an existing takaful company in the country or launch our own Takaful company.

What plans do you have about expansions overseas?

The year 2009 will be significant in turning National Bonds into a global entity. We have already signed two memorandums of understanding with partners in Indonesia and Jordan to launch similar National Bonds companies in these countries. The Indonesian company will be launched before the end of the year as negotiations have reached a very advanced stage. The Jordanian one will follow soon.

We are also negotiating with potential partners in Saudi Arabia, Qatar, Bahrain and Malaysia. Also on our radar are two major Middle Eastern countries, Egypt and Turkey, with populations of 80 million and 60 million, respectively.

With these expansions, do you have a new investment strategy?

No, we will continue to focus on major infrastructure projects in real estate, education and healthcare. People in all countries worry about these three areas, regardless of their level of income. This gives us low risks in our investments. We will try to give a local touch to investments in other countries, and our Mudarabah system allows us to use different languages, so it can be applied in any country.

PROFILE: Mohamed Qasim Al Ali, CEO, National Bonds Company

Mohamed Qasim Al Ali took over as the chief executive officer of National Bonds Company in January 2008 and was the deputy CEO since May 2007.

Al Ali started his career with Emirates airline in 1989 as an overseas area manager. In 1995 he was appointed Emirates' general manager for the United Kingdom and Ireland. He later moved to Dnata, the sister company of Emirates, as vice-president customer service and operations.

Al Ali is a graduate from the Florida Institute of Technology in the United States.