Saudi Gazette report

RIYADH — Saudi Arabia started subscription to the first Shariah-compliant, government-backed savings product for individuals namely Sah on Sunday Feb. 4. The payout rate for the first issue is determined at 5.64 percent, and the subscription period will end at 3 p.m. on Tuesday, Feb. 6.

The Saudi Ministry of Finance and the National Debt Management Center (NDMC) launched the Sah product, which comes within the initiatives of the Financial Sector Development Program, one of the Kingdom’s Vision 2030 programs. Sah is aimed at raising savings rates among individuals by motivating them to deduct part of their income periodically and set aside it for saving.

The product is allocated for individuals with lucrative returns that are offered on a monthly basis, in accordance with the issuance calendar. The saving period is for one year with a fixed return and the accrued yields are disbursed at the end of the sukuk’s term (maturity date).

Sah is for Saudi citizens only, who are over the age of 18 years, provided the subscriber has an account with either SNB Capital, AlJazira Capital, Alinma Investment, SAB Invest or Al Rajhi Capital.

The allocation is set to take place on Feb. 13, and the redemption period will be on Feb. 18-21 while the redemption amounts will be paid on Feb. 25.

The NDMC answered a number of queries pertaining to the Sah product. It clarified that Sah is the first subsidized savings product intended for individuals that is compatible with Islamic Shariah in the form of sukuks within the Kingdom’s local sukuk program in Saudi riyals.

The purpose of issuance of Sah is enhancing financial planning 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. Sah is issued by the government through the Ministry of Finance and the National Debt Management Centre. Its advantages include Shariah compliant, annual returns, easy subscription, no fees for subscribers, and no restrictions on redemption.

The Sah bonds will be issued through participating financial institutions and there are no fees for subscribers. The nominal value of Sah is SR1000. The value and return of Sah are fixed for each issue.

The minimum subscription rate of Sah is SR1000, which is equivalent to the nominal value, while the maximum subscription limit is SR200000 for the total number of issues per individual during the program period.

The annual profit of the bonds will be paid on the maturity date, which will be one calendar year. The subscription amounts along with profits, if any, will be transferred to the instrument owner immediately after the maturity date. There will be a low risk ratio when subscribing to Sah.

The return percentage for Sah depends on market conditions from month to month. It is not possible to buy and sell these bonds through trading in the financial market. Also, there is no special application to subscribe to Sah and the subscription is through participating financial institutions.

Sukuk holders can request redemption during the periods specified according to the annual calendar published by Sah, and the accumulated profits will not be accrued upon early withdrawal.

The return for subscription depends on the return percentage specified for each issue, and there is a predetermined subscription period, indicated in the annual calendar of Sah publications. The holder of Sah product is not required to bear payment of zakat, the NDMC clarified.