Dubai eyes global commodities receipt in Europe
State-owned Dubai Multi Commodities Centre (DMCC) plans to extend its global electronic warehouse financing instrument to Europe in the wake of the global credit crunch, a senior official said on Monday.
The Global Multi Commodities Receipt (GMR), launched last November in Singapore, Malaysia and South Korea, allows businesses to access lines of credit against their inventories by pledging them in favour of member banks.
It can also be used for electronic transfer of title to the goods covered by it, to others within the system and through a transfer endorsement.
"If you look at the current situation in the banking sector and international markets, you will see the crucial need for companies to leverage without undue reliance on typical balance sheet finance," said Ashok Das, DMCC's executive director of soft commodities and commodity trade finance.
"We are planning to introduce this facility to other destinations ... and we are currently looking into launching GMRs in Europe, maybe this year," he told Reuters in an interview.
Dubai, the Gulf's trade and tourism hub, launched the region's first futures exchange, in which DMCC owns a majority stake, in 2005 as the economies of the Gulf Arab nations boomed on windfall oil income.
Traditionally, traders have extended loans to each other based on "trust and reputation" rather than lending against inventories.
The commodities-backed model will help banks and financial institutions to mitigate risk in a financing transaction.
The receipt can be also used as a title document in the trading of goods and for physical delivery of commodities from the selected global locations into the Dubai Gold and Commodities Exchange (DGCX).
"You can just track your inventory online and have easy access to financing facilities without spending a long time filling in hundreds of papers," Das said.
"In case of a credit default, the lender can rely on the value of the existing inventory, which gets sold in a bilateral trade arranged by the DMCC," he said.
The GMR platform has 16 banks, including HSBC and Fortis , and 110 companies fully integrated into the system.
"We expect a growing number of companies to sign up to use this facilities ... especially with the commodities market booming here and the launch of plastics futures contracts," he added.
The DMCC expects to trade low-density polyethylene, high- density polyethylene, linear low-density polyethylene and polypropylene later this year to cater to the rapidly growing petrochemicals market in the Middle East.
For each grade, there will be three regional contracts: Northeast Asia, Southeast Asia and the Middle East.
In March, the DMCC said it planned to set up an investment firm to develop and manage a range of Sharia-compliant commodities products, as part of Dubai's plans to become a centre for commodities trading.
/Reuters/
The Global Multi Commodities Receipt (GMR), launched last November in Singapore, Malaysia and South Korea, allows businesses to access lines of credit against their inventories by pledging them in favour of member banks.
It can also be used for electronic transfer of title to the goods covered by it, to others within the system and through a transfer endorsement.
"If you look at the current situation in the banking sector and international markets, you will see the crucial need for companies to leverage without undue reliance on typical balance sheet finance," said Ashok Das, DMCC's executive director of soft commodities and commodity trade finance.
"We are planning to introduce this facility to other destinations ... and we are currently looking into launching GMRs in Europe, maybe this year," he told Reuters in an interview.
Dubai, the Gulf's trade and tourism hub, launched the region's first futures exchange, in which DMCC owns a majority stake, in 2005 as the economies of the Gulf Arab nations boomed on windfall oil income.
Traditionally, traders have extended loans to each other based on "trust and reputation" rather than lending against inventories.
The commodities-backed model will help banks and financial institutions to mitigate risk in a financing transaction.
The receipt can be also used as a title document in the trading of goods and for physical delivery of commodities from the selected global locations into the Dubai Gold and Commodities Exchange (DGCX).
"You can just track your inventory online and have easy access to financing facilities without spending a long time filling in hundreds of papers," Das said.
"In case of a credit default, the lender can rely on the value of the existing inventory, which gets sold in a bilateral trade arranged by the DMCC," he said.
The GMR platform has 16 banks, including HSBC and Fortis , and 110 companies fully integrated into the system.
"We expect a growing number of companies to sign up to use this facilities ... especially with the commodities market booming here and the launch of plastics futures contracts," he added.
The DMCC expects to trade low-density polyethylene, high- density polyethylene, linear low-density polyethylene and polypropylene later this year to cater to the rapidly growing petrochemicals market in the Middle East.
For each grade, there will be three regional contracts: Northeast Asia, Southeast Asia and the Middle East.
In March, the DMCC said it planned to set up an investment firm to develop and manage a range of Sharia-compliant commodities products, as part of Dubai's plans to become a centre for commodities trading.
/Reuters/
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