Question # 174: As salam alaikum! Some banks are issuing Gold certificate, whereby they act as your agent and buy gold for you and in return issue a certificate. They charge you some amount i.e. 0.15 dirham per gram of gold purchased and then you have two options: a) either to take physical gold from them b) redeem your certificate at market price at the date of redemption. Based on the price on the day of redemption the bank charge you 0.5%. Is that sort of arrangement valid and halal?
Bismi-llahi r-raḥmani r-raḥīm,
Assalamu ‘laikum warahmatullahi wabarakatuh,
All praise and thanks are due to Allah (سبحانه و تعالى), and peace and blessings be upon His Messenger (صلى الله عليه و سلم).
First of all, we implore Allah (سبحانه و تعالى) to help us serve His cause and render our work for His sake.
Shorter Answer: From the perusal of ‘General Terms and Conditions’ provided by the bank, the following three points need to be highlighted:
- According to Islamic shari’ah, the gold transaction in which the buyer takes the gold, and the seller receives the money should take place in the same sitting. The adherence to this requirement by bank is not clear. Nevertheless, it has been mentioned in the document that the procedure has been vetted by the Shari’ah
- The bank as Wakil (agent/representative) ensures that the Custodian stores and safe-keeps the gold in specific accounts and separate dedicated vaults, and not in common share of large gold quantities. Also each gold bar is assigned a specified number to tag the owner’s gold account. This provision of the transaction is in line with the shari’ah
- Lastly, payment of Wakala fees, namely, Gold Settlement Amount, acquisition fee, Certificate Fees, Arrangement Fees, insurance (takaful), custodian fees is permissible.
Long Answer: From the perusal of ‘General Terms and Conditions’ provided by the bank, the following three points need to be highlighted:
- Purchase of gold by the bank (wakil on your behalf): The Prophet (صلى الله عليه و سلم) said: “Gold for gold, silver for silver, like for like, same for same, hand to hand… If it is an exchange of one of these things for another, then sell as you like, so long as it is hand to hand.” (Narrated by Muslim) That is a transaction of gold for silver, or money for either of them, it must be: “Yadan bi Yad“. That means delivery of all the involved components on the spot. In another narration “Haa bi Haa” which means give and take immediately. This is what has been stated by the fuqaha’. This is called taqaabud (a reciprocal taking possession of commodity and its monetary equivalent by buyer and seller respectively), in which the buyer takes the gold, and the seller takes the money (in the same sitting). However, recognizing that cases of international sales and banking transfers normally take some time for reaching the other party, the OIC Fiqh Academy resolves that any normal period a transfer or delivery takes is disregarded and the transaction is still considered Yadan bi Yad (Fatawa on Sale and Sarf by Dr. Monzer Kahf). However, this issue is not clear from the bank’s ‘General Terms and Conditions’. Nevertheless, it has been mentioned in the document that the procedure has been vetted by the Shari’ah Board.
- Identification of the gold purchased by bank: The bank’s ‘General Terms and Conditions’ states “For avoidance of doubt, the Wakil shall ensure that the Custodian shall store and safe-keep the Gold in specific accounts and dedicated vaults which are separated, and not kept as common share in the large gold quantities available with the Custodian. Also each gold bar constituting the Gold shall have a specified number, which shall be used by Wakil to tag opposite the Muwakkil’s gold account with the bars constituting the Gold of the Muwakkil”. This provision of the transaction is in line with the shari’ah requirement.
- Wakala fees (Gold Settlement Amount, acquisition fee, Certificate Fees, Arrangement Fees, insurance (takaful), custodian fees): Nothing could be found from the scholars that would make such charges impermissible from the Islamic point of view.
(The above answer has been reviewed by Dr. Main Khalid Al-Qudah, Member of the Fatwa Committee of Assembly of Muslim Jurists in America)
Allahu A’lam (Allah (سبحانه و تعالى) knows best) and all Perfections belong to Allah, and all mistakes belong to me alone. May Allah (سبحانه و تعالى) forgive me, Ameen.