By Arno Maierbrugger/Gulf Times Correspondent /Bangkok
A digital gold-trading platform compliant with Islamic finance norms is about to get launched in the UK as early as this month to tap a growing trading market for the precious metal in volatile times.
Minted, the trading name of The Minted App Ltd, is a start-up domiciled in London that aims at making gold trading “simple, secure and affordable” and attract digitally-versed retail investors to a low-risk investment, according to Shahad Ahmed, one of the firm’s co-founders.
Minted launched the beta version of its platform in early May and plans to introduce a full-fledged version in mid-June and a mobile app by the end of July, pending final regulatory approval from the UK’s Financial Conduct Authority to operate a digital money business.
The concept of Minted is based on purchasing physical gold at highest purity of 24 karat and to store it on behalf of the buyer at a vault in London’s Mayfair district without storage fee with complimentary insurance for the first 12 months, whereby it would be also possible – on request – to send the physical gold to verified customer addresses in the UK. The gold is provided by several refineries, among them Istanbul, Turkey-based refinery Nadir Metal Rafineri. Investors can start purchasing as much gold as they wish or resort to savings plans with instalments of as little as £1 per day to make gold “accessible for everyone,” as Ahmed puts it.
With regards to Shariah-compliance of his investment platform, Ahmed told Islamic finance information platform Salaam Gateway that the idea was to fill a gap in the investment market for Muslims which he believes was “currently underserved” and to provide “a fantastic low-entry, Shariah-compliant proposition for Muslims to invest in a commodity they are familiar with.”
In addition to the gold investing platform, Ahmed plans to set up a “digital challenger bank” next year which aims at providing more investment options for gold, as well as for silver and other precious metals. While it would not be a sole Shariah-compliant bank, it would focus on ethical investment products which are also Shariah-compliant.
With a total of £1mn in seed funding, of which it already received half from a venture capital investor, Minted plans to expand to Germany and France and, later on, to Turkey, the US, South Asia and Africa.
Gold trading has only recently become more popular in Islamic finance. Although gold is much used in jewellery in the Muslim world, it had played a minor role in trading. Therefore, while Shariah-compliant gold investment products have existed at least since 2009, they have not seen a significant level of usage.
This has changed with the introduction of the Shariah Gold Standard by the World Gold Council together with the Accounting and Auditing Organisation for Islamic Finance Institutions (AAOIFI) in 2016 which did away with initially contradictory opinions and finally allowed a collective fatwa on permitting gold trade and make Shariah-compliant gold investment products available. This includes, besides physical gold trading through gold investment accounts, also gold savings plans, purchase of gold certificates or exchange traded funds backed by physical gold, as well as gold spot contracts. In addition, the AAOIFI-backed standard is also permitting a number of other transactions and uses of gold, including gold-backed sukuk, gold used for forward financing (salam), gold-backed leasing (ijarah), gold as collateral (al-rahn), gold as security deposit (hamish jiddiyyah) or for commitments and obligations in Shariah-compliant financial transactions (wa’d). The new standard also applies to silver and potentially to other precious metals.
The standard has been very well received in the Islamic finance world, triggering the establishment of a number of new investment service providers such as Minted, as well as providing access to a long-underused market. According to the World Gold Council, gold currently has a market capitalization of $7tn, which is 24-times larger than the outstanding volume of sukuk, and has an average daily turnover on the London OTC of $240bn, making it more liquid than both the German and UK sovereign bond markets. Gold over the past decade with 117% growth in value in US dollar terms also outperformed other Islamic assets classes such as the Dow Jones Islamic index (47%) and the Dow Jones sukuk index (4%) in the period.
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