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Cash havens

There are plenty of analogies that put an emphasis on saving. There’s the one about squirrels burying acorns, saving for a rainy day (even in the desert) and even bears going into hibernation for the winter. It’s the sort of stuff most kids (supposedly) have drilled into their impressionable heads when they are very young. Well, that used to be the way it was.

However, the events of the past two years seem to suggest that some kids (perhaps a whole generation or two) forgot to turn up on the day it was being taught and instead skipped class to attend the course on how to live the over-leveraged life.

Some economies have taken a horrendous pounding thanks to the profligate spending of a significant percentage of the population that was, simply, living way beyond its means and it was not helped by record low interest rates.

“I would argue that the problem is one of aggregate demand, and that the lower 20-50 per cent buying beer, nappies and frozen peas, account for far more economic activity, than do the top five per cent which own 80 per cent of the wealth. Indeed the reason why the richest 20 per cent are so ‘under leveraged’ is likely that they cannot actually spend any more of their income, (beyond a point) and are thus forced to save. You could argue about what they do with the money?” wrote one contributor on the FT Alphaville blog.

“Generally speaking, a society with a high savings ratio will not suffer from inflation for long, since the abundant capital supply will swiftly find its way into the economy through investment,” Wang Qing, Morgan Stanley's Chief Economist in China told the Beijing-based Business Watch magazine.

China has become one of the largest suppliers of global saving – totalling around $440 billion in 2008 – with a current account surplus of over 10 per cent of GDP in 2008, compared with around three per cent as recently as 2004, according to the Reserve Bank of Australia.

It added that the average saving ratio of the oil exporters (the Middle East region plus Russia) has fluctuated widely in line with changes in world oil prices, with the saving ratio having risen sharply in the 2000s. In contrast, their investment ratio has remained fairly steady through time, at around the levels seen in other regions outside of Asia.

But now, it seems, savings accounts are suddenly back in vogue and wounded banks are once again trumpeting the wise old adage, ‘Save money, live better,’ as they attempt to shore up eviscerated balance sheets with deposits. Governments have also joined the call to economic rationale.

High net worth individuals, whose numbers are thought to have fallen by about 10 per cent in the UAE in the past year or so, are actively being courted by banks in almost every emirate with a range of savings packages offering all sorts of incentives. Most have the standard AED 5,000 minimum account size requirement.

One of the more recent offerings comes from Dubai Bank, with its Kunooz Value Plus Account, which launched in the summer of 2007. Every AED 5,000 in the account provides the account-holder with a chance to win the grand prize of AED 1,000,000 in a monthly draw and a chance to win one of three Prizes of AED 10,000 every day (excluding Fridays, Saturdays and Public Holidays).

The account, which is Shari'ah-compliant, offers customers the benefits of a flexible transactional account, with the potential to maximise profit opportunities and win prizes. There are no certificates to collect and no long, drawn out processes to complete.

“Kunooz has been a success because of its simplicity and value proposition. We have attracted a lot of non-Muslims as well as Emiratis and people from the subcontinent,” Zahir Khurshid, Dubai Bank’s Head of Product Development told Banker Middle East.

“Since this campaign was launched in March 2009, Dubai Bank has been able to attract tens of thousands of new customers. Our balances have grown by 500 per cent since we launched the Kunooz Value Plus account. Of course, it has also been a major boost to the brand awareness of the Dubai Bank name,” Mohamed Amiri, Head of Retail & Business Banking added.

MashreqMillionaire from (where else?) Mashreq, allows certificate holders the chance to win AED 1 million every week and unlike some of the other banks, there is no holding period required to be eligible to qualify for the draws.

MashreqMillionaire Savings Certificates can be bought by all holders of a valid resident, visit or transit visa of the UAE and all GCC nationals. These certificates cannot be jointly held and are non-transferable.

The bank says that the MashreqMillionaire saving certificate “is a simple, risk-free, capital guaranteed investment opportunity with the potential of making you a millionaire every week!”

Meanwhile, down the road in Abu Dhabi, NBAD (National Bank of Abu Dhabi), ADCB (Abu Dhabi Commercial Bank), ADIB (Abu Dhabi Islamic Bank and UNB (Union National Bank) have all been courting the higher earners with a fairly diverse range of accounts.

NBAD’s Winner Deposit Account, which requires a minimum deposit of AED 5,000 and multiples, offers nearly half a dozen chances of winning anything from AED 50,000 (three draws every months), with another two draws of AED 100,000 and AED 250,000.

UNB’s offering is the Al Awwal Gold Savings Certificate and has prizes up to AED 3 million each quarter. It offers guaranteed of two per cent returns a year (For deposits above AED 30,000) and claims that there are “no hidden / withdrawal charges.”

Those who want to avail of ADIB’s Ghina account will need to have a minimum opening balance of AED 20,000 and after four months will have a chance to AED 2 million. ADIB says that Ghina is a demand deposit investment account based on Mudarabah, where the customer “may reap profits (which is the main object of this account) or bears losses (if the losses are not due to ADIB’s negligence or misconduct).”

Another Mudarabah type of deal is on offer from National Bonds which was offering annual returns of 7.07 per cent (in 2008) and has 101 prizes weekly, including a shot at winning AED 1 million.

Bondholders saving AED 3,000 and above will be automatically eligible in the Mercedes Benz C200 Elegance weekly draw plus 100 other exciting prizes.

However, if the bondholding is AED 10,000 and above, there is a chance to win weekly a Mercedes Benz C200 Elegance, AED 1 million and other 100 prizes.

At the time of going to press, National Bonds said that bondholders who have savings of AED 25,000 and above by end December 2009, will be eligible for the Grand Super Saver draw that offers a package of a fully furnished two bedroom apartment and a Mercedes Benz S350 L plus the opportunity to win AED 1 million and other 100 prizes.

ADCB’s Million Dollar Dreams, is a little different in that its programme gives its depositors a one in 5,000 chance of winning a $1 million jackpot. ADCB’s offering includes two per cent interest on deposits of over AED 30,000.

Each deposit in multiples of AED 30,000 (or $10,000) provides savers with an additional entry into other draws, such as the Loyalty Draw or the Early Bird Draw. The programme is open to existing and non-ADCB customers.

It also adds bells on, such as the chance to win a Mercedes (the E 230 model), just like National Bonds, except National Bonds have a Mercedes Benz C200 Elegance or a Mercedes Benz S350 L as a prize. Will you make your decisions based on the model of Mercedes on offer?

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