Over the years, the UAE has witnessed an exponential increase in demand for bullion financing in parallel with the growth in demand for precious metals. The UAE’s total estimated trade volume is US$80 billion across diamonds and gold, with diamonds making up around a total of US$35 billion. With its multidisciplinary approach and in-depth sectorial knowledge in the precious metals and diamond industry, the National Bank of Fujairah (NBF) has focused on addressing financing in the market as the sector continues to grow and further boost economic diversification efforts.
The NBF’s journey with bullion banking commenced with gold financing in 2002, when the bank first established its relationship with a prominent European bank to supply bullion. Prior to that, the bank had been financing trade via conventional credit facilities. Starting with a small core team and a handful of customers, the NBF was quickly able to make a mark as a reliable partner in the industry.
Building strong supply relationships with European bullion banks and refineries across the world was instrumental to the inception of the NBF’s bullion offerings, and to catering to the local jewelry industry. As such, the bank began providing specialized lending in the form of gold in an aim to finance the core working capital requirements of the jewelry industry. It then launched its product offerings in several categories including gold loans, unfixed gold, gold variation margin overdrafts and other working capital and hedging facilities.
Boasting a growing team, the NBF’s dedicated precious metals and diamond unit has focused on providing personalized services to UAE-based clients in the jewelry and diamond industry. The bank’s specialized team has also focused on serving the jewelry and diamond industries covering major verticals, namely gold and diamond jewelry, and rough and polished diamonds. Based in Dubai’s Almas Tower, in the heart of one of the world’s biggest diamond trading centers, the NBF’s diamond financing team focuses on providing short-term trade finance products to established rough and polished diamond traders and manufacturers. With its vaulting facilities, both in-house and with Transguard in Deira Gold Souk Dubai, the bank’s services entail facilitating trades in gold, platinum and silver.
Following the successful launch of NBF Islamic in 2014, the bank broadened its suite of offerings and launched its Shariah compliant corporate banking services to cater to businesses looking for a reliable and trusted banking partner in the UAE.
Today, the bank’s priority is to continue developing NBF Islamic into a fully-fledged proposition encompassing a comprehensive range of solutions for both the retail and corporate banking segments. Testament to the exponential growth that Islamic financing is witnessing globally, the UAE’s Ministry of Economy and the Dubai Islamic Economy Development Centre estimate that Shariah compliant assets worldwide could hit the US$3.3 trillion mark by 2021. As such, the introduction of the Shariah standard for gold in 2016 would boost the demand for gold globally. Experts estimate that if just 1% of Islamic finance goes into gold, demand could increase up to a massive 1,000 tons a year.
Banking on its position as one of the leading bullion banks, the NBF went to structure the Shariah compliant bullion financing solution for Malabar Gold, making the first-ever transaction of its kind in accordance with AAOIFI standards in the precious metals industry in the UAE. This partnership followed the launch of the AAOIFI Shariah Standard on Gold in December 2016 in collaboration with the World Gold Council. Working closely with Amanie Advisors and its own Shariah Board, the NBF has developed a unique Shariah compliant bullion financing solution to cater to the complex needs of its customers, thus cementing its position as a key financing partner for the precious metals industry. In a nutshell, the bank boasts the capability to provide alternatives to all its conventional gold products under Islamic structures to corporate clients in the UAE.
The NBF developed Shariah compliant bullion financing which will pave the way for other players in the industry. The banking sector has long been keen to make gold a Shariah compliant asset for their customers as well as motivate Islamic financial institutions to align their current product offerings, if they are keen to have the wider market for their products, by being inclusionary. This will further encourage the gold industry to fulfill their financing needs in accordance with Shariah principles.
The NBF showcased its steady focus on growing the bank’s Islamic offerings in this space and catering to clients’ evolving requirements across retail and corporate banking.
Given the global economic slowdown, Islamic finance has made some significant strides in terms of penetrating new customer segments and benefiting from breakthroughs in the sector like the establishment of the Shariah standard for gold. As we move forward, we can expect further growth in this space as the UAE focuses on transforming itself into a global hub of the Islamic economy.
This article is contributed by the National Bank of Fujairah.