Saudi NDMC Issues Sixth Round of its Popular Government Guaranteed SAH Retail Savings Sukuk to Bolster Financial Inclusion and to Encourage Savings Among Citizens
The Saudi Ministry of Finance, through the National Debt Management Centre (NDMC), issued the sixth round of its subscription-based Sukuk savings product, SAH, on 4 August 2024, offering a rate of return of 5.48% per annum, with a subscription period closing later in the month. The offering aims to bolster financial stability and to encourage saving among Saudi citizens, especially the youth.
In tandem with the unlimited Saudi Arabian Government SAR-denominated Sukuk Programme, the NDMC similarly oversees the Saudi Arabian Government Guaranteed SAH Retail Savings Sukuk launched by the Saudi Ministry of Finance in February 2024.
The SAH Savings Sukuk product, which was launched by the Ministry of Finance and managed by the NDMC, is an initiative under the umbrella of the Financial Sector Development Programme’s initiatives (one of the Saudi Vision 2030 programmes) aimed to increase the savings ratios among individuals by motivating them to allocate a portion of their income to savings on a periodic basis, in addition to increasing the supply of savings products, raising the awareness around financial literacy and the importance of savings and its benefits for future plans.
SAH Sukuk are designed to be low-risk and fee-free, making it accessible through the digital channels of approved financial institutions. This latest round of SAH is part of a broader effort to foster a culture of saving by encouraging individuals to regularly set aside a portion of their income. The Sukuk, says the NDMC, aligns with Saudi Vision 2030’s Financial Sector Development Programme, which seeks to raise the national savings rate from its current level of 6% to an international benchmark of 10% by 2030. By offering an easy and structured way for Saudis to invest, SAH is aimed at supporting this ambitious goal.
Subscriptions for SAH start with a minimum amount of SR1,000 (US$266.39), which is the value of one Sukuk certificate. The maximum subscription limit is set at SR200,000, allowing individuals to purchase up to 200 certificates during any subscription period.
Through this approach, added the NDMC, the programme aims to make savings more attractive and accessible to a broad segment of the population, further promoting financial growth and stability across the nation. It offers attractive returns aligned with prevailing market rates, leveraging government backing and guarantees to ensure it remains a low-risk financial instrument. Participants can redeem their investments according to the published annual calendar; however, early withdrawals forfeit accrued returns and profits.
According to Hani Al-Medaini, CEO of the NDMC, the SAH Sukuk also aims to foster private-sector collaboration. Future initiatives include developing and launching tailored savings products for various individual categories through banks, fund managers, financial technology companies, and others. “I believe that issuing SAH is a great financial initiative led by the Saudi government to encourage people to save and enhance financial inclusion in the Kingdom. This initiative entitles everyone to access financial products and services that meet their needs, such as having a bank account or savings product like SAH,” added Al-Madini at the time of the earlier issuances.
The NDMC has issued SAH Sukuk starting in February 2024 through to March, April May, June and August 2024 to date. The issuance has steadily been gaining traction especially among younger and retail investors. According to the NDMC, the second round of issuance of SAH Savings Sukuk, for instance, which closed on 5 March 2024 with a total volume of savings subscriptions reaching SAR959 million (US$255.71 million), attracted the participation of 37,000 savers – up by 2,000 on the inaugural SAH Sukuk in February 2024, which had a total volume of savings subscriptions of SAR861 million (US$229.58 million).
SAH Sukuk are reserved for Saudi citizens only, who are over the age of 18 years, provided the subscriber has an account with either SNB Capital, Al Jazira Capital, Alinma Investment, SAB Invest or Al Rajhi Capital, the primary dealers and distribution channels. SAH Sukuk, according to the NDMC, is the first subsidized savings product intended for individuals that is compatible with Sharia’a principles in the form of Sukuk. It comes under the aegis of the Saudi Ministry of Finance’s Local Trust Certificates Issuance Programme denominated in Saudi riyals. The purpose of issuance of SAH Sukuk is to enhance the financial planning of the younger generation for the future and increasing individuals’ savings rates by motivating them to periodically deduct a portion of their income and allocate it to savings, in addition to increasing the supply of savings products.
Its key marketing drivers include Sharia’a compliance products which enjoy growing popularity and traction among Saudi youth, featuring a short-term tenor of 1-year, annual returns, easy subscription, no fees for subscribers, and no restrictions on redemption.
According to local banking sources, the SAH Sukuk has the potential to become an exemplary retail Sukuk savings product – in terms of Issuer of Last Resort (the Saudi Government), Guarantor, Volume, Competitive Pricing, and Investors.