New Is­lamic fi­nance guid­ance on gold em­pha­sizes real deal

Kuwait Times - - BUSINESS -

Is­lamic fi­nance ex­perts have de­vel­oped new rules for gold trans­ac­tions, they said yes­ter­day, po­ten­tially open­ing the way for Is­lamic in­sti­tu­tions to trade gold and sil­ver much more ac­tively. Gold trans­ac­tions must be fully backed by phys­i­cal metal and set­tled on the same day, the de­vel­op­ers of the new guid­ance said, to ob­serve Is­lam’s dis­tinc­tion be­tween real eco­nomic ac­tiv­ity and spec­u­la­tion.

Tra­di­tion­ally, gold has played a very mi­nor role in Is­lamic fi­nance and there has been lit­tle ac­tiv­ity be­yond spot trad­ing, partly be­cause of un­cer­tainty over what is re­li­giously per­mis­si­ble. The new stan­dards, which also ap­ply to sil­ver, could help to change this. The Bahrain­based Ac­count­ing and Au­dit­ing Or­ga­ni­za­tion for Is­lamic Fi­nan­cial In­sti­tu­tions (AAOIFI) spent a year work­ing out the new rules on gold trad­ing and agreed them last month.

AAOIFI de­vel­oped its guide­lines with the World Gold Coun­cil (WGC), a Lon­don-based mar­ket de­vel­op­ment body, to clar­ify ex­ist­ing Is­lamic rul­ings on bul­lion and make it eas­ier to con­duct com­plex trans­ac­tions. The guide­lines will help to in­crease ac­cep­tance of gold prod­ucts among Is­lamic in­vestors while giv­ing Is­lamic banks new liq­uid­ity-man­age­ment tools, said Hamed Has­san Merah, sec­re­tary­gen­eral of AAOIFI, whose stan­dards are fol­lowed in whole or in part by sharia-com­pli­ant banks around the world. — Reuters

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.