The Dubai Gold Receipt (DGR), a tool that allows access to trade finance, has seen about 2,000 transactions worth about $1 billion (Dh3.67bn) so far, the CEO of Dubai Multi Commodities Centre (DMCC), the authority that introduced the financial instrument in Dubai, told Emirates Business.
"We are proud of this inventory trade finance instrument. In the past two years, this tool has won an award for the best trade finance deal," said Malcolm Wall Morris, CEO of DMCC.
DMCC introduced the DGR facility in November 2005 to tap into the attractive trade finance market in the Middle East. DGR is an electronic vault receipt system. A DMCC-approved vault operator or collateral manager issues a DGR upon the deposit of gold or other metals by a trader. Once issued, the DGR takes the form of an instrument that can be pledged to a bank in order to obtain financing.
The deal involving the National Bank of Fujairah (NBF) and Athena SA, a major Greek contracting company, the borrower, Athena SA, secured financing from NBF for the construction of the south breakwater berths at the Fujairah Port for Dh126.5m. Steel plates were imported by Athena under a Letter of Credit issued by NBF and stored in a "field warehouse" at the project site, controlled by Geochem, the collateral manager.
In another important deal, a DGR facilitated the global finance company Fortis to extend $17.8m in financing to INTL Commodities, a DMCC member company. The DGR was issued against a total of 799kg of gold and 1,500kg of silver, providing INTL Commodities with access to $17.8m in financing. Brink's global services, the international security services company, served as the vault operator for this transaction.
Dubai-based traders of precious metals cite the example of DGR and call for launching a kind of gold pawning facility to unlock a huge loan market in the emirate.
"It's the right facility introduced at the right place at the right time," said a marketing manager of a DMCC member company.
By Shashank Shekhar
© Emirates Business 24/7 2010
