A Fatwa by Islamic finance stalwart Sheikh Dr Mohamed Ali Elgari has declared diamonds to be a new Shariah compliant asset class, acting as a precious commodity that could be pivotal to overcome a key challenge of asset-backed transactions.
This pioneering development was announced on the 29th May 2025, with the Dubai Multi Commodities Centre (DMCC) selected as the venue to provide audited, tax-free custody of diamonds for the benefit of Islamic banks and investors worldwide.
“We intended to unlock US$1.2 trillion of natural diamonds as an investment asset. Their dense value, combined with modern technology, has surprisingly made diamonds ideal for Islamic finance,” Diamond Standard Founder and CEO Cormac Kinney shared with IFN Investor.
With their compact size and high value, diamonds can be a practical alternative to underpin and grow the annual settlement for an estimated US$5 trillion worth of global loan and bond transactions that must be asset-backed, through structures like commodity Murabahah.
Until now, commodity Murabahah contracts used metals like nickel, copper or aluminium. “These assets were often created on paper, as options and warrants, a practice now in conflict with the proposed AAOIFI Standard 62, which, as it stands, will require the title to the commodity to be delivered to the borrower,” Cormac observed.
Compared to other commodities and metals that can result in substantial storage and delivery costs, diamonds can also be used as Shariah compliant, fully deliverable and fungible physical assets, with far cheaper custody and delivery costs.
This advantage was recognized by Sheikh Dr Mohamed Ali Elgari, who is the Shariah board member for organizations including AAOIFI, Islamic Fiqh Academy, BlackRock and many of the industry’s leading financial institutions.
To ensure easy access to this Shariah solution as an active market-making desk, the DMCC venue will provide a standing pool of diamonds to support Islamic applications via a commodity holding and trading company in the GCC region – which will be run by Diamond Standard.
Operationally, this firm will sell all its assets every morning to the Islamic banks for Murabahah deals and then buy everything back every evening. Over US$280 million worth has been channeled so far toward this undertaking, mainly in the form of natural diamonds by various mining concerns. Cormac said the target is to raise the value to US$3 billion in the next three years.
“Having the assets, the trading and the Islamic finance aspects all being based in a Muslim-majority country makes it very attractive to the banks here in the GCC region. They don’t like to have the assets in Switzerland or the trading in London, they much prefer it all being here where they can see the commodity and if needed, they can take delivery.”
Cormac said the actual trading operations could start by the end of this year once all necessary logistics for custody and process approvals are streamlined.
