The Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) said on Monday it had approved a sharia standard for gold-based products, a move aimed at expanding the use of bullion in Islamic finance.
Traditionally, gold has been treated as a currency in Islamic finance which has confined its use to spot transactions, but fresh guidance from AAOIFI is expected to spawn a wave of product development in the industry.
AAOIFI approved the final version of the standard on gold and its trading controls during a meeting of its sharia board held last week, the industry body said in a statement seen by Reuters.
This followed a year-long effort that included public hearings held in Oman, Sudan and Malaysia over the past few months, as well as a series of meetings of a dedicated AAOIFI subcommittee.
An official launch would be announced shortly, AAOIFI said.
The new standard addresses issues including collateral, set-off, screening and the exchange of gold in spot and deferred transactions. Sharia compliant products backed by gold could include exchange traded funds and savings accounts.
In a sign of market interest, the final standard will be made available on a complimentary basis by both AAOIFI and the World Gold Council, an industry body which supported the development of the standard.
Proponents hope the new guidance will help address muted consumer appetite for gold in the Middle East region, where demand has actually fallen in recent years.
AAOIFI also approved a standard on liability of investment managers, which addresses issues including negligence and breach of contracts.
The standard also details liability on the part of service agents in transactions including Islamic bonds (sukuk) and in syndicated financing contracts and other products.