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Sun 2 Sep 2012 08:17 AM

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UAE residents not saving enough - National Bonds CEO

Concerns over rising cost of living and outstanding debts biggest reasons not to save

UAE residents not saving enough - National Bonds CEO
Mohammed Qasim Al Ali, CEO, Nationals Bonds.

UAE residents are not saving enough money for their future amid concerns about the rising cost of living, outstanding debts and a lack of savings culture, the CEO of National Bonds said.

National Bonds, the Dubai-owned Islamic savings scheme, said it had seen a “slight increase” in its 2012 savings index, which measures saving sentiment in the Gulf state, but said the vast majority of residents still do not save enough.

“A lot of people, unfortunately, in this part of the world, they live pay cheque to pay cheque and that needs to change,” said Mohammed Qasim Al Ali. “We cannot work alone; the government intuitions have to play a role [and the] education system has to play a role.”

The Dubai-based savings scheme saw a 3.4 percent increase in the number of people buying its bonds in the first half of the year compared to the previous year.

Initiatives aimed at improving spending habits such as a workshop for Emiratis whose debts were recently settled by the UAE government helped boost the appeal of savings schemes such as National Bonds, said Al Ali. 

“Usually the strength of the economy depends on how the saving sentiments are in that country. I think the UAE government has already paid attention to it, we have seen it conducted through workshops.

“[Savings are] part of building up the foundations of the economy, it sits on the savings of people; it’s another way of boosting the liquidity in the economy,” he said.

National Bond’s 2012 index, which amalgamates the answers to three questions - about a person’s savings potential, the savings environment and their own financial stability into base values - increased 2.8 points to 101.8, up from 99 in 2011.

But while the index indicates a small rise in the number of people planning for the future, the number of residents not saving remains high. Nearly two thirds (65 percent) of those polled said they do not save regularly, a six percent increase compared to the previous year.

The majority of the 611 residents (87 percent) polled said they do not believe their current savings are adequate for the future while just 1 percent considered their savings “more than enough” for the future.

Residents cited the high cost of living (44 percent) and debts and loans (38 percent) as the biggest reasons for not saving.

Sentiment towards saving for the future dropped among Emiratis, Arab expats and Asian expats but increased among Western expats while savings for retirement, children’s education and for the purchase of property all ranked in the top three priorities for all nationalities.

L M 7 years ago

A person will be able to save if the basic commodities costs are low. If the costs are high , there is no option of saving.

Asad 7 years ago

UAE and in particularly Dubai's economy is based on consumerism. Investors are here because they see people are buying. When luxuries of life are presented as basic needs and also when the prices of actual basic necessities are ever shooting then you shouldn't expect people saving their money.

Dave 7 years ago

When newcomers have to fork out a years rent in advance, often through taking loans, do not be surprised if there are few people saving their money. Not everyone can claim and get free housing

R. Venkataraman 7 years ago

People are saving, may not be with National Bonds. The return on the Bonds are very less - less than 4%, which is not attractive at all. People who save, turn out to become investors, and their expectation is a minimum of 8 to 10% annual return. If National Bonds declares a dividend or profit sharing of over 8% or bonus bonds, they will see immediate increase in number of Saving citizens. As there are alternate investment avenues offering more than 10%, why should they resot to National Bonds.

Ganapathy 7 years ago

Well said and it is true...

Sanjay 7 years ago

Yes instead of giving all those prizes -they should give higher returns.

Alan Satish 7 years ago

I assume you guys are comparing to saving schemes in India, where the inflation alone is somewhere close 8%. I don't want to get into the discussion about how much the inflation rate is over here but I don't think it is comparable.

rejoy 7 years ago

By the there are companies here offering higher returns than National Bonds...you just have to look around.

Kohinoor 7 years ago

Though it is Govt backed, my savings are much safer in India and ofcourse yield higher than 8%. Inflation!!!

Though the name sounds expat, grocery supplied under govt subs??? Some items are 3 times in few years. Went whooping heights with Rents. Rents are down, but never the price....

Doug 7 years ago

Why would you even bother saving money if you lived in the UAE?

If you're a UAE national and get yourself into debt, the Government simply pays it off for you - not to mention offering you a massive loan at 0% interest that will probably never need to be paid off. So in that circumstance, you don't need to say.

Meanwhile, if you're an expat fortunate enough to have a disposable income, you're not going to retire here. You're going to go back to your home country the moment your visa runs out. So there's no point saving in the UAE for that. And given the general ineptitude of the banking system in the UAE, why would you bother trusting your life savings to banks that can't even do something as basic as offer direct debits or post things to your address?