Opportunities for Gold in Islamic Finance Shaokai Fan World Gold - - PowerPoint PPT Presentation

4-6 JUNE 2017 Grand Copthorne, Singapore

Opportunities for Gold in Islamic Finance Shaokai Fan World Gold Council

The Shari’ah Standard on Gold

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Why is a Shari’ah Standard on Gold necessary?

“Ribawi” Item Gold is subject to more stringent religious rules Limited Guidance Existing Shar’iah guidance on modern gold products was limited and fragmented

What does the Shari’ah Standard on Gold do?

Removes Uncertainty An AAOIFI-issued standard carries widespread recognition throughout the Islamic community Definitive Guidance The Standard provides definitive guidance on all the modern financial uses of gold, enabling more Islamic gold products AAOIFI Standard No. 57 on Gold and its Trading Controls (the “Shari’ah Standard

• n Gold”) was published in November 2016

The Potential for Gold in Islamic Finance

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Islamic finance suffers from a lack of diversity and liquidity in its investible

• universe. Adding gold greatly expands the possibilities within Islamic finance.

Sukuk Outstanding USD291 billion

Gold USD7 trillion

Islamic Banking Assets USD1.5 trillion

Islamic Funds USD71 billion Takaful USD23 billion

Size of Gold Market vs. Islamic Assets (2015)

Large, Liquid Asset Class Fills Critical Gaps in Islamic Finance Powerful Diversification Benefits Can Enhance Returns Ultimate Safe Haven

Benefits of Gold for Islamic Investors

Source: World Gold Council, IFSB

The Potential for Gold in Islamic Finance

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Gold shows almost no correlation to existing Islamic asset classes, and is not more volatile than existing assets.

• 0.06
• 0.01

0.02 0.10 0.12 0.13

• 0.5
• 0.3
• 0.1

0.1 0.3 0.5 Takaful Index FTSE NASDAQ Shariah Index DJ Sukuk Index Axis REIT DJ Islamic Index FTSE World Shariah Index

Islamic Asset Classes Correlation to Gold (8 Year)

4

0.30 0.21 0.17 0.16 0.16 0.15 0.06 0.1 0.2 0.3 Takaful Index FTSE NASDAQ Shariah Index Gold FTSE World Shariah Index DJ Islamic Index Axis REIT DJ Sukuk Index

Annualized Volatility of Islamic Assets and Gold (8 Year)

Source: World Gold Council, Bloomberg. 8-year returns and correlations used due to limitations on data availability for Islamic assets

Advancing Islamic Finance Through Gold

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New Product Development Outreach and Education With the Shari’ah Standard on Gold in place, we are engaging the broader Islamic finance community on gold’s potential.

• Working with Islamic financial

institutions on creating new gold-based products

• Developing solutions that fit the

needs of all Islamic investors – including retail, high net worth, institutional, and others

• Engaging Islamic institutional

investors and other buyside institutions on the case for gold in Islamic finance

• Outreach to policymakers and

industry groups on the potential for gold to advance Islamic finance