When it comes to ways to save, many – if not most – people would opt to open an account with a bank. But it is worth considering other options because they can offer extra benefits.

Take National Bonds Corporation, which claims to be the first sharia-compliant scheme of its kind.

Launched in 2006, it aims to be “everyone’s favorite place to save and invest” in the UAE and offers customers the opportunity to earn profit on bonds, as well as win thousands of prizes every month.

What is the National Bond profit rate?

But how much you make depends on the annual profit rate in any given year. And the rate varies from customer to customer based on factors such as how many bonds the customer holds and how long for.

According to the website, in 2013 customers with:

  • Less than AED 10,000 in bonds earned 1.42 percent
  • Between AED 10,000 – 100,000 earned 2.03 percent
  • More than AED 100,000 earned 2.89 percent.

Banks, by comparison, offered an average profit rate in 2013 of 0.54 percent per annum on savings accounts to 1.15 percent per annum on 12-month deposits, according to the National Bonds website.

Over the last five years the National Bonds rate has varied from up to 3.54 percent in 2009, to up to 3.78 percent in 2010, up to two percent in 2011, up to 1.5 percent in 2012 and up to 2.89 percent in 2013.

What does that mean in term of actual investment?

Say you invested AED 100,000 in 2009 and left it sitting there for the full five-year period. By the end of the term you would have AED 114,462; in other words a profit of AED 14,462 – not bad for having not lifted a finger to earn it.

So it is worth investing money for the rate it offers alone.

And then there are the prizes, more than 43,000 of them each month worth AED 49 million, including a million-dirham  prize, two gold bars and two BMW cars.

[Compare UAE savings accounts | How to invest AED 100,000?]

  2009 2010 2011 2012 2013
Starting balance 100,000 103,540 107,454 109,603 111,247
Profit rate 3.54% 3.78% 2% 1.5% 2.89%
Profit 3,540 3,914 2,149 1,644 3,215
Total at year-end, inc. profit 103,540 107,454 109,603 111,247 114,462

How do I buy National Bonds?

Each bond costs AED 10, with a minimum purchase of AED 100. They can be purchased from nearly 700 outlets across the country, including Emirates Post offices, exchange houses and banks. Alternatively, you can buy bonds online, by visiting the National Bonds office and even by a monthly saver plan with a standing instruction with your bank.

Both residents and non-residents are eligible to buy bonds and the minimum age requirement is 18, although parents and guardians can buy them on behalf of minors.

To buy, residents are required to produce a copy of your passport and visa page plus Emirates ID. Non-residents have to provide a copy of their passport and visit visa page. In the case of a parent or guardian purchasing them for a minor – either residents or non-residents – identification for both should be provided.

How do I redeem National Bonds?

Bonds bought by cash or check can be redeemed after an initial 30-day holding period, while there is a lock-in period of 90 days for bonds bought by credit card.

For instant cash redemptions of up to AED 10,000 you can visit select Al Ansari Exchange and UAE Exchange branches. Customers redeeming bonds worth more than AED 10,000 have to call National Bonds directly, as do non-residents.

The scheme currently has almost 780,000 customers from 200 nationalities.

Can I earn profit if I’ve had the bonds less than a year?

Yes, you can earn profit on bonds you hold for less than one year, at a pro rated amount. But you must hold them for at least three months (if you pay by cash or check) before you can cash them in.

The profit is weighted depending on how long you hold them for. The weighting below was implemented in January 2013 therefore has not been used in the five-year calculations above.

If you had held your bonds for three months at the time of the annual profit rate calculation, you would receive 40 percent of the year’s profit. If you hold them for between three and six months, you would receive 60 percent etc.

National Bonds say that your eligibility for profit is directly linked to the duration of your investment with them. The longer you save or invest, the higher the profit rate you receive.

Profit tier 1 2 3 4 5 6 7 8
Bond holding period Less than 3 months Less than 6 months 6 – 12 months 1 – 2 years 2 – 3 years 3 -4 years 4 – 5 years More than 5 years
Profit weighting 40% 60% 80% 100% 110% 120% 130% 140%