“The millionaire-maker”

Instead of a fixed return on investments, Dubai-based National Bonds offers a chance to win life-changing cash prizes. But despite the economic crisis forcing people to redeem their bonds, the corporation’s CEO, Mohammed Qasim Al-Ali, says now is the time to put cash aside and save for the future.

“We are becoming the most popular place to save and in three years we have attracted 500,000 investors”
-ohammed Qasim Al-Ali

If you awoke on your birthday with a splitting headache you would probably curse your luck and reach for the medicine cabinet. When this happened to Muhammad Fayyaz Yakub he rang work to report in sick but a phone call he received shortly afterwards proved to be the tonic to make his discomfort vanish: he had become a millionaire overnight and scooped AED1 million in the National Bonds weekly draw. The person on the other end of the phone was National Bonds CEO Mohammed Qasim Al-Ali, who always chooses to ring the winner of the top prize to personally deliver the good news. "People call me the millionaire-maker when they see me out and about because I have become something of a public figure here," Al-Ali reveals with a smile when Business Management catches up with him in his Dubai office.

Al-Ali has been making the life-changing call to the lucky top prize winners since he was made CEO in early 2008 following a 20-year career in the aviation industry. However he reveals that he still gets a buzz out of telling people they have just become millionaires. "You cannot imagine the experience I have from getting first hand reactions from the winners. They are normally in a mixture of shock and disbelief but it is still very satisfying to make one more person a millionaire every week." One of Al-Ali's first questions to unsuspecting winners is whether or not they are driving. "If they are I ask them to park up because I worry they might end up in an accident when I reveal the news."

The result of draw, which is generated randomly by a computer, is broadcast on the first Saturday night of the month on Dubai One television show Bonds for Life. "One person told me that their TV wasn't working so they didn't know the result so I told them to make sure they have a spare one next time," Al-Ali recalls jokingly. A total of 101 prizes worth AED1,155,000 are given away every Saturday, although the minimum bondholding in order to be eligible for the weekly 'millionaire draw' is AED10,000. Up until May the draw took place monthly but this was increased to weekly in a bid to attract more investors. This year National Bonds, dubbed 'Everyone's Favourite Place to Save', will award AED60 million prizes and create 39 millionaires. Total bond sales last year were AED4 million.

Financial backing

National Bonds, which first began in March 2006 and makes bonds available from 500 outlets nationwide alongside its website and the banks, is 50 percent owned by the Government of Dubai. Local shareholders Dubai Bank, Dubai Holding and Emaar Properties hold a 16.6 percent share each. National Bonds is licensed by the Central bank of the UAE and subject to the same regulatory procedures as any other financial institution. With the backing of the government investors see it as a pretty solid place to put their hard earned dirhams. If you change your mind or need the funds suddenly you can withdraw your money within 30 days without any fees. Al-Ali says National Bonds is about teaching people to be more financially savvy by saving for a rainy day and not overstretching themselves with lavish purchases. "National Bonds communicates with people about the importance of saving with a Shariah-compliant savings scheme and people see it as a safe option for their money," he says. "However, I am not saying don't spend because this is good for the economy."

Returns for bondholders in 2007 were 6.03 percent and this rose to 7.07 percent in 2008, which was higher than savings rates offered by both conventional and Islamic banks. As well as the cash prizes, at the end of the financial year shareholders receive 20 per cent of the profits made by National Bonds, which is based on the Islamic principle of Mudaraba. But despite the favourable returns on offer, the past months have been difficult for National Bonds. Indeed, at one point as much as 25 percent of investors were redeeming their investments as property prices fell and job losses mounted in Dubai. "People had to drip into their pockets as lending shrunk because the banks have been short of liquidity," Al-Ali notes philosophically. Nevertheless, he is confident that the turbulent economic period will encourage more people save for the future. And the chance of scooping serious money is great enticement because "we continue to reward our bondholders on a weekly basis via exciting prizes," he reiterates.

Mixed bag

For National Bonds itself the major correction in the housing market has affected its portfolio investments. However, National Properties, a subsidiary of National Bonds, has built the AED1.5 billion Skycourts development – a residential project in the heart of Dubailand – and Flamingo Creek in the Lagoons. Last year National Bonds founded an education fund (Taleem) to invest in and manage school projects, while a similar fund is earmarked for the healthcare industry for the end of 2009 – a sector left relatively unscathed by the downturn. National Bonds Corporation has also invested in BCS (property management), Souk Extra (retail community shopping chain) and in M'sharie, (private equity arm of Dubai Investments).

A three-person Shariah board at National Bonds Corporation oversees the company's investments to assess their soundness. Around half of National Bonds portfolio is ploughed into Islamic funds such as Sukuks. "We have a very mixed portfolio [of investments]," says Al-Ali. "However, we are a low risk taker – and we need to be because we have people's savings so we have to be prudent where we put it. We also have to adhere to strict Shariah rules when making investments." He also adds that the period when most investors were withdrawing funds had flattened out and bond sales were picking up, particularly among corporate investors. In fact, the number of institutes snapping up bonds soared by 150 percent last year compared to 2007.

And with no ceiling on how much can be invested, National Bonds is increasingly targeting high net worth individuals looking to shun riskier investments for more of a safe haven. Indeed, one bondholder has invested AED40 million. "We have created a management unit and we have relationship managers to look after high net worth people and invite more to invest." Today, it's more about building on National Bonds early success by attracting investors and persuading existing clients to top up their bonds. "When we started three years ago we were doing the hunting [for investors] – now after three years it is time for the farming – we are looking for a mixture of investors." He adds: "For instance, about 50 percent of bond holders are Arabic speakers, 18 percent are minors because people are increasingly looking after their children (the youngest winner so far was three years of age) and 34 percent are female." In fact, women are fast becoming a key market for National Bonds with female bondholders increasing by 40 percent in 2008 compared the previous year. Al-Ali is reluctant to speculate on whether women are more inclined to save than men, choosing instead to attribute it to recent publicity of the scheme and a revamp of the website.

On top of this, word of National Bonds benefits is spreading to other communities. Indeed, the number of foreign bondholders rocketed by 35 percent last year. "We are becoming the most popular place to save and in three years we have attracted 500,000 investors," says Al-Ali with a broad smile. "And more and more people are investing because of the attraction of the draws." With bond sales looking buoyant again as people tighten their belts and squirrel their cash in safer investments, the future is looking rosy National Bonds Corporation. In case you were wondering what Pakistani national Muhammad Fayyaz Yakub plans to do with his newfound wealth, he says he will donate a part of it to charity and start building his dream home back in Karachi.