Strong demand for gold and an affinity among Muslims for the yellow metal has compelled Shariah banks to integrate digital features facilitating the trading and utility of gold in a bid to capture this burgeoning market.
Already a popular investment and savings instrument in Indonesia, Shariah compliant gold products, mainly in the form of Islamic pawnbroking, are widely accepted across the world’s most populous Muslim nation of 225 million. But banks are taking it a step further, filling in a gap that a few Islamic fintech start-ups are trying to with digital gold trading services.
Bank Syariah Mandiri has integrated the e-mas feature into its Mandiri Syariah Mobile (MSM) app, enabling customers to open a gold savings account giving them access to purchase, store, transfer as well as sell gold in a completely digital environment. The initial deposit is set at 0.1 gram or less than IDR100,000 (US$7.06) with subsequent increments of 0.05 gram.
“We hope that the e-mas feature in MSM can improve the function of Islamic banks not only as a provider of banking service products in general, but also for financial solutions, especially investments for the community. God willing, this e-mas feature will also be a tool and means of educating the public, including the millennial generation, to start investing early,” shared Achmad Syafii, the bank’s director of information technology, operations and digital banking.
The Islamic bank has been aggressively upgrading its digital architecture: it launched an application programming interface portal in support of the country’s open banking efforts and have been pushing its MSM platform.
At the end of October 2020, the bank’s MSM user base reached 1.47 million, with transaction volume growing 88.64% year-on-year.
This digital gold rush has also reached the Arabian shores. Despite being one of the most influential Islamic (financial) markets globally, Islamic gold accounts are absent from Saudi Arabia, until this week.
The Kingdom’s largest bank, National Commercial Bank (NCB), rolled out the country’s first Shariah compliant gold account for the retail market. Available through its mobile app as well as its online banking platform, customers are now able to purchase, save, sell and receive in-kind gold bullion, with the option of receiving gold bars starting from the weight of one kilogram or storing it in the bank’s vaults.
NCB’s innovation is most welcomed and could pave the way for others to follow suit.
Despite being favored in the Islamic world, gold had for a long time been viewed as a controversial investment instrument due to its Ribawi nature. Uncertainties, however, were cleared up in 2016 when the World Gold Council and AAOIFI formalized and release a global Shariah standard on the usage of gold, providing much-needed clarity for the Islamic finance and investment community.