Currently, the only way to access the sukuk market, made up of a Sharia-compliant bond-like instrument used in Islamic finance, is through a minimum investment of $200,000. However, fractional sukuks would enable retail investors to invest as little as $1,000, giving them access to the benefits of fixed-income financial products.

After receiving initial approval from the Regulations Lab within the UAE government under the supervision of the Securities and Commodities Authority (SCA), ADIB is aiming to facilitate this in the future.

This presents a new investment opportunity for customers, enabling them to invest in a new asset class with smaller investment amounts offering. This cooperation aims to provide a set of flexible laws and legislation to conduct tests on fractional Sukuk, ensuring the highest levels of safety and risk mitigation in applying new technologies and avoiding risks that arise during the experimental phases.

Mohamed Abdelbary, group CEO at ADIB, also said: “Sukuks are a great asset class that meet Islamic finance principles, we want to make it more easily accessible to retail investors. As part of our 2035 vision to become the world’s most innovative Islamic bank, we are forging ground-breaking new partnerships with fintechs to deliver pioneering initiatives to meet evolving customer needs.

“We are delighted to be partnering with the Regulations Lab, the Securities and Commodities Authority and the relevant authorities to test and launch this new digital asset.”

Embracing fractional investing

Under the agreement, a comprehensive legislative work system will be established to test the fractional sukuk technology that digitally divides a sukuk into small portions and allows individual investors to pool their money into buying fractional shares of typically expensive corporate Sukuks without needing significant capital.

The collaboration aims to create a safe environment for the progression of this technology and accelerate the process of its development and availability in the market.

Once the product is tested and launched, customers will be able to create a customised sukuk portfolio with a minimum investment threshold of $1,000, tailored to align with their risk tolerance, preferred sectors, and maturity periods. This enables consumers to select sukuk based on desired returns, credit ratings, as well as other criteria that help guide their investment decisions.