Dubai Gold Receipt enables financing of over $100m

Gold traders, bullion banks and vault operators have used DGR, an electronic vault receipt system operated by DMCC, to enable $103.8m of financing against a total of 4,442 kgs of gold and 1,500 kgs of silver stored in DMCC-approved vaults in the UAE. All DMCC-approved vault operators - Brinks Global Services, Transguard and Group 4 Securicor International - have been utilised for these transactions.

DGR, an innovative tool for facilitating trade finance activities for gold and silver, is an integrated electronic vault receipt system designed to enable businesses to access lines of credit against their inventories, by pledging them in favour of member banks. Under the terms of DGR, members who store precious metal in a DMCC-approved bullion vault - can be issued an electronic DGR against the value of the goods. The member can then use the online vault receipt to obtain financing from member banks and financiers.

The unique design of DMCC's DGR system means that its geographical footprint can extend beyond the country, and gold traders resident across the world can access lines of credit from globally-based bankers/financiers, against their gold stored in UAE-based vaults.

Ahmed bin Sulayem, Executive Chairman, DMCC, said:

"Access to finance is one of the most crucial factors that drives commodity trade worldwide. Given the current volatility in global gold markets and the ensuing Basel II regime, banks are on the lookout for secured lending options that enable them to mitigate risk better. DMCC is committed to enhancing physical infrastructure and ancillary services for the gold and precious metals sector, and has developed this innovative, tradeable, electronic vault receipt that may be used for effective risk mitigation by banks. DGR thus offers traders and banks alike an ideal trade financing tool."

Ian MacDonald, Executive Director, Gold and Precious Metals, DMCC, said: "The confidence that both traders and bankers place in the DGR model is evident from the fact that it has enabled financing of over $100m in a span of only eight months. Most importantly, DGR is increasingly being recognised as an innovative risk mitigating trade financing tool, and even international banks are utilising the DGR to finance gold stored in the emirate. We are confident that DGR will see many more landmark transactions in the future."

The DGR system also enables transfer of title to the underlying gold or silver to trader members within the system, through an electronic transfer endorsement process. DMCC has established a set legal framework that governs each electronic transaction so that members are provided with the opportunity to trade their goods with increased confidence among a network of approved associates. The title transfer functionality also enables members to carry out physical deliveries in the UAE against the gold or silver futures contracts traded on the Dubai Gold and Commodities Exchange, a DMCC initiative.