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Khaleej Times
12 hours ago
- Khaleej Times
Diamonds enter the financial spotlight: A new era for Islamic finance and global trading
For centuries, diamonds have symbolised luxury and rarity. Now, a pioneering financial technology is transforming them into something far more significant: a regulated, tradable commodity with the potential to reshape Islamic finance and global investment. At the heart of this innovation lies a powerful realization. While gold and silver have long served as tangible assets for trading and wealth preservation, natural diamonds, despite representing a 1.2 trillion-dollar global resource, have remained largely inaccessible to investors due to their unique and varied characteristics. Unlike other commodities, each diamond is slightly different in quality and composition, preventing the creation of a transparent, universal pricing structure. 'Natural diamonds are the only major natural resource that global investors couldn't trade transparently,' explains Cormac Kinney, Founder and CEO of Diamond Standard. 'Each stone varies in carat, clarity and color, which has made standardization nearly impossible. But through computer science and quantitative trading, we developed a method to group diamonds into standardized, fungible units, all having the same value.' The result is a new form of investment-grade diamond bar, composed of stones carefully matched for value equivalence. These bars make it possible to trade diamonds in a manner similar to gold bullion, reliably, consistently and at scale. For Islamic finance in particular, the implications are substantial. Unlike metals such as copper, which are cumbersome and expensive to store and secure, diamond-based commodities are easier to custody and settle. This makes them an ideal asset for Murabaha-based financial instruments. Each diamond bar includes a wireless computer chip that allows custodians and financial institutions to verify the asset's presence and authenticity instantly. This chip issues a blockchain-based digital token that represents legal ownership of the physical commodity. The token itself is tradeable and can even be subdivided into micro-units called 'Carats,' each fully backed by the underlying diamonds. This system ensures a high level of flexibility, transparency and security in commodity trading. The launch of this innovation comes at a pivotal time. Recent regulatory changes in Islamic finance have restricted the use of derivatives such as options and warrants in Murabaha structures, pushing banks to seek new Shariah-compliant alternatives. 'All major Islamic banks are now looking for compliant substitutes for physical settlement,' says Kinney. 'We're not changing the process. We're simply offering a better, more cost-efficient commodity. That's why banks and service providers have responded with such strong interest.' Looking ahead, Kinney envisions a much larger role for diamonds in global finance. This includes their potential not only as a tradeable asset class but also as the foundation of a new digital currency. In a world increasingly interested in asset-backed digital systems, a diamond-backed currency could offer a Sharia-compliant and inflation-resistant alternative to cryptocurrencies. 'Many Islamic institutions reject speculative instruments like Bitcoin. But a digital currency backed by real, audited diamonds could provide stability and compliance in one package. It's a concept particularly attractive to BRICS countries and other diamond-producing nations,' adds Cormac Kinney. With global demand projected to reach 100 billion dollars across Islamic finance and digital currency applications, diamonds, once seen purely as symbols of wealth and luxury, may soon underpin a new chapter in financial history. No longer just ornamental, they could become a foundational asset in the evolving landscape of ethical, secure and innovative finance.
Zawya
15 hours ago
- Zawya
International Monetary Fund (IMF) Staff Completes 2025 Article IV Mission with Nigeria
The Executive Board of the International Monetary Fund (IMF) concluded the Article IV Consultation with Nigeria.(1) The Nigerian authorities have implemented major reforms over the past two years which have improved macroeconomic stability and enhanced resilience. The authorities have removed costly fuel subsidies, stopped monetary financing of the fiscal deficit and improved the functioning of the foreign exchange market. Investor confidence has strengthened, helping Nigeria successfully tap the Eurobond market and leading to a resumption of portfolio inflows. At the same time, poverty and food insecurity have risen, and the government is now focused on raising growth. Growth accelerated to 3.4 percent in 2024, driven mainly by increased hydrocarbon output and vibrant services sector. Agriculture remained subdued, owing to security challenges and sliding productivity. Real GDP is expected to expand by 3.4 percent in 2025, supported by the new domestic refinery, higher oil production and robust services. Against a complex and uncertain external environment, medium-term growth is projected to hover around 3½ percent, supported by domestic reform gains. Gross and net international reserves increased in 2024, with a strong current account surplus and improved portfolio inflows. Reforms to the fx market and foreign exchange interventions have brought stability to the naira. Naira stabilization and improvements in food production brought inflation to 23.7 percent year-on-year in April 2025 from 31 percent annual average in 2024 in the backcasted rebased CPI index released by the Nigerian Bureau of Statistics. Inflation should decline further in the medium-term with continued tight macroeconomic policies and a projected easing of retail fuel prices. Fiscal performance improved in 2024. Revenues benefited from naira depreciation, enhanced revenue administration and higher grants, which more-than-offset rising interest and overheads spending. Downside risks have increased with heightened global uncertainty. A further decline in oil prices or increase in financing costs would adversely affect growth, fiscal and external positions, undermine financial stability and exacerbate exchange rate pressures. A deterioration of security could impact growth and food insecurity. Executive Board Assessment (2) Executive Directors agreed with the thrust of the staff appraisal. They commended the authorities on the successful implementation of significant reforms during the past two years and welcomed the associated gains in macroeconomic stability and resilience. As these gains have yet to benefit all Nigerians, and with heightened economic uncertainty and significant downside risks, Directors emphasized the importance of agile policy making to safeguard and enhance macroeconomic stability, creating enabling conditions to boost growth, and reducing poverty. Directors agreed that the Central Bank of Nigeria is appropriately maintaining a tight monetary policy stance, which should continue until disinflation becomes entrenched. They welcomed the discontinuation of deficit monetization and ongoing efforts to strengthen central bank governance to set the institutional foundation for inflation targeting. Directors also welcomed steps taken by the authorities to build reserves and support market confidence and praised reforms to the foreign exchange market that supported price discovery and liquidity. They called for implementation of a robust foreign exchange intervention framework focused on containing excess volatility, stressing that the exchange rate is an important shock absorber. Directors also agreed with staff's call to phase out existing capital flow management measures in a properly timed and sequenced manner. Directors called for a neutral fiscal stance to safeguard macroeconomic stabilization with priority given to investments that enhance growth. Directors also called for accelerating the delivery of cash transfers to assist the poor. They commended the authorities on advancing the tax reform bill, an important step towards enhancing revenue mobilization and creating fiscal space for development spending, while preserving debt sustainability. Directors recognized actions to strengthen the banking system, including the ongoing process of increasing banks' minimum capital. They welcomed the authorities' efforts to boost financial inclusion and promote capital market development, while emphasizing the importance of moving to a robust risk‑based supervision for mortgage and consumer lending schemes as well as the fintech and crypto sectors. Directors welcomed progress made in strengthening the AML/CFT framework and stressed the importance of resolving remaining weaknesses to exit the FATF grey list. To lift Nigeria's growth outlook, improve food security, and reduce fragility, Directors highlighted the importance of tackling security, red tape, agricultural productivity, infrastructure gaps, including boosting electricity supply, as well as improved health and education spending, and making the economy more resilient to climate events. They noted that addressing structural impediments to private credit extension is also needed to support growth. Directors welcomed the IMF's capacity development to support authorities' reform efforts and agreed that enhancing data quality is critical for sound, data‑driven policymaking. Table 1. Nigeria: Selected Economic and Financial Indicators, 2023–26 2023 2024 2025 2026 5/8/2025 13:03 Act. Est. Proj. Proj. National income and prices Annual percentage change (unless otherwise specified) Real GDP (at 2010 market prices) 2.9 3.4 3.4 3.2 Oil GDP -2.2 5.5 4.9 2.3 Non-oil GDP 3.2 3.3 3.3 3.3 Non-oil non-agriculture GDP 3.9 4.1 3.7 3.7 Production of crude oil (million barrels per day) 1.5 1.5 1.7 1.7 Nominal GDP at market prices (trillions of naira) 234 277 320 367 Nominal non-oil GDP (trillions of naira) 221 260 303 351 Nominal GDP per capita (US$) 1,597 806 836 887 GDP deflator 12.6 14.5 11.4 11.4 Consumer price index (annual average) 24.7 31.4 24.0 23.0 Consumer price index (end of period) 28.9 15.4 23.0 18.0 Investment and savings Percent of GDP Gross national savings 31.8 39.6 37.5 37.7 Public -0.1 3.9 2.2 1.7 Private 31.9 35.7 35.3 36.1 Investment 30.0 30.4 30.5 33.1 Public 3.2 4.8 5.4 5.5 Private 26.8 25.6 25.1 27.6 Consolidated government operations Percent of GDP Total revenues and grants 9.8 14.4 14.2 13.8 Of which: oil and gas revenue 3.3 4.1 5.1 4.9 Of which: non-oil revenue 5.8 9.2 8.8 8.8 Total expenditure and net lending 13.9 17.1 18.9 18.7 Overall balance -4.2 -2.6 -4.7 -4.9 Non-oil primary balance -4.9 -4.9 -7.2 -6.9 Public gross debt1 48.7 52.9 52.0 50.8 Of which: FX denominated debt 18.1 25.5 25.8 24.8 FGN interest payments (percent of FGN revenue) 83.8 41.1 47.3 49.2 Money and credit Contribution to broad money growth (unless otherwise specified) Broad money (percent change; end of period) 51.9 42.7 17.9 22.3 Net foreign assets 10.5 30.4 2.1 7.2 Net domestic assets 41.3 12.3 15.8 15.1 Of which: Claims on consolidated government 20.1 -11.9 6.2 4.1 Credit to the private sector (y/y, percent) 53.6 30.1 17.9 18.2 Velocity of broad money (ratio; end of period) 2.7 3.3 2.2 2.1 External sector Annual percentage change (unless otherwise specified) Current account balance (percent of GDP) 1.8 9.2 7.0 4.6 Exports of goods and services -12.8 -4.5 -6.0 1.3 Imports of goods and services -4.4 -0.8 -6.8 8.4 Terms of trade -6.1 -0.6 -7.4 -3.3 Price of Nigerian oil (US$ per barrel) 82.3 79.9 67.7 63.3 External debt outstanding (US$ billions)2 102.9 102.2 105.9 110.2 Gross international reserves (US$ billions, CBN definition)3 33.2 40.2 36.4 39.1 Equivalent months of prospective imports of G&S 5.4 5.7 7.5 7.7 Memorandum items: Implicit fuel subsidy (percent of GDP) 0.8 2.1 0.0 0.0 Sources: Nigerian authorities; and IMF staff estimates and projections. 1 Gross debt figures for the Federal Government and the public sector include overdrafts from the Central Bank of Nigeria (CBN). 2 Includes both public and private sector. 3 Based on the IMF definition, the gross international reserves were US$8 billion lower in December 2024. (1) Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. Staff hold separate annual discussions with the regional institutions responsible for common policies in four currency unions—the Euro Area, the Eastern Caribbean Currency Union, the Central African Economic and Monetary Union, and the West African Economic and Monetary Union. For each of the currency unions, staff teams visit the regional institutions responsible for common policies in the currency union, collects economic and financial information, and discusses with officials the currency union's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis of discussion by the Executive Board. Both staff's discussions with the regional institutions and the Board discussion of the annual staff report will be considered an integral part of the Article IV consultation with each member. (2) At the conclusion of the discussion, the Managing Director, as Chairman of the Board, summarizes the views of Executive Directors, and this summary is transmitted to the country's authorities. An explanation of any qualifiers used in summings up can be found here: The Executive Board takes decisions under its lapse-of-time procedure when the Board agrees that a proposal can be considered without convening formal discussions. Distributed by APO Group on behalf of International Monetary Fund (IMF).
Arabian Business
18 hours ago
- Arabian Business
Financing a greener future: The rise of sustainable finance
As environmental challenges intensify and social inequalities deepen, the finance sector is stepping up in a big way. This new approach to finance isn't just a trend; it's a transformative movement that's reshaping how we view money, investment, and economic growth. By integrating environmental, social, and governance (ESG) factors into investment decisions, this emerging field of finance ensures that capital serves a greater purpose. In other words, it involves banks, investors, and insurers considering critical issues like climate change, social justice, and corporate governance when making investment decisions. With the world's evolving challenges, financial institutions now recognise their power to fund initiatives that promote long-term sustainability, from backing renewable energy projects to supporting companies with fair labour practices. The rise of sustainable finance highlights how investors are aligning the pursuit of returns with broader society's goals, proving that profitability and purpose can and should go hand in hand. This approach not only enhances financial performance but also drives positive change, creating a future where economic growth contributes to a more sustainable and equitable world. The role of financial institutions in driving change Financial institutions, including banks, insurance companies, and investment firms, play a critical role in promoting sustainable finance by integrating ESG principles into their operations. Banks are enhancing their lending portfolios with green financing and responsible lending practices, focusing on loans for sustainable businesses while diverting funds from carbon-intensive industries. The rise of green loans and sustainability-linked loans exemplifies this shift, with the market exceeding $265 billion in 2020, highlighting the financial industry's commitment to renewable energy and socially beneficial projects. Similarly, insurance companies are incorporating sustainability into their core operations by assessing ESG risks in underwriting and investments. They consider the implications of climate change on insured assets and offer incentives, such as discounts for electric vehicle owners, to encourage policyholders to adopt greener practices. Investment firms and asset managers are in charge of ESG investing by building portfolios that emphasise companies with strong sustainability performance. This shift not only meets the growing demand for ethical investment options but also directs significant capital toward sustainable enterprises. Collectively, these efforts send a strong signal to businesses, encouraging enhanced ESG performance and creating a virtuous cycle that rewards sustainable practices, driving positive environmental and social change. The growing influence of regulations and consumer demand Both regulatory frameworks and consumer demand drive the growing push for sustainable finance. Regulators worldwide are making sustainability a requirement, not an option. In the European Union, new frameworks like the EU Green Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR) are reshaping how financial institutions operate, providing clear guidelines on what qualifies as a 'green' investment. These frameworks help ensure transparency and consistency in sustainable finance, allowing banks and investors to make informed decisions. But it's not just Europe. The United States and China, two of the world's largest economies, are also stepping up. For instance, the U.S. Securities and Exchange Commission (SEC) finalised its long-awaited Climate Disclosure Rule in March 2024, requiring large public companies to disclose their climate-related financial risks and greenhouse gas emissions, which will begin reporting in 2025. In July 2023, China took a major step in aligning its green finance regulations with global frameworks. It introduced the Common Ground Taxonomy (CGT), a joint China-EU initiative that recognises 72 economic activities as environmentally sustainable. This makes it easier for international investors to compare Chinese green bonds with their EU counterparts. As regulatory changes reshape the market, consumer and investor demand for ethical finance is skyrocketing. A new generation of investors—Gen Z and millennials—are more conscious than ever about the impact their investments have on society and the environment. One of the latest surveys revealed that 96% of millennial investors are eager to invest in ESG-focused funds, indicating a massive shift in how capital is allocated. This rising demand is not just anecdotal; it's influencing where money flows. Investors are rewarding companies with strong ESG records and divesting from those with poor practices. Similarly, retail banking customers increasingly prefer green products — from fossil-fuel-free investment options to loans supporting energy-efficient homes. Consumers increasingly expect their banks and insurers to align with their values, and many are willing to switch providers if their expectations aren't met. This rising demand for ethical finance is reshaping the competitive landscape, giving financial institutions that prioritise sustainability a clear advantage. By responding to these changing expectations and incorporating ESG into their core offerings, firms can thrive in the new era of conscious capital. How technology is powering sustainable finance As the world becomes more interconnected, technology has emerged as a key enabler of sustainable finance. The fusion of financial technology and sustainability is creating innovative financial products and services that offer both environmental impact and economic value. Green fintech utilises advanced technologies like blockchain, artificial intelligence (AI), and big data to enhance transparency, efficiency, and accountability in sustainable investments. Blockchain stands out as one of the most promising technologies for sustainable finance. By providing secure, transparent, and decentralised transaction records, blockchain boosts trust in ESG investments. For example, blockchain-enabled green bonds tokenise investments, allowing for traceability of funds to projects like renewable energy and clean water. This transparency reduces the risk of misallocation and increases investor confidence in socially responsible investments. AI is another vital technology in this space. AI-driven platforms help financial institutions make informed investment decisions, optimise portfolios, and identify sustainable opportunities. Applications range from risk assessment to monitoring ESG performance, improving overall decision-making. Furthermore, big data analytics enable investors to gain insights into ESG risks and opportunities from complex datasets. This capability helps predict market trends, evaluate long-term sustainability, and pinpoint impactful projects to support. By merging fintech with sustainable finance, these technologies propel progress toward the Sustainable Development Goals (SDGs). Investors can better align their portfolios with their values and tackle global challenges like climate change and social inequality. As technology continues to advance, these tools will be essential for financial institutions navigating the evolving landscape of sustainable finance. A better future through sustainable finance Sustainable finance marks a fundamental shift in the architecture of 21st-century finance. By aligning capital with ESG principles, financial institutions are not only managing risks more effectively but also tapping into new growth opportunities in sectors like green technology. As regulations continue to evolve and consumer expectations grow, embracing sustainable finance has become a competitive advantage. Financial institutions that strategically leverage technology to integrate ESG principles will be better positioned to deliver superior long-term returns and contribute to a resilient, inclusive economy. The message is clear: sustainable finance is good for the planet, good for society, and, ultimately, good for business.
