International diamond banks operating in Antwerp and other major diamond centres are keen to set up operations in the Dubai Diamond Exchange (DDE) with the expansion of diamond trade in Dubai.
Experts in the capital-intensive market of gold and diamond financing feel the involvement of Indian banks and such entities as the Antwerp Diamond Bank Group – a leading global diamond financier – will add more depth to diamond banking in the UAE. The Belgian group and some major Indian banks have already started operations in the DDE, where even the small transactions through such banks can be $2 million (Dh3.67m), with the amount reaching more than $100m for a single big deal.
Youri Steverlynck, Chief Executive Officer of DDE, said: “More than half of the 265 diamond traders registered with the Dubai Diamond Exchange are Indian companies. We have invited many Indian banks to operate in the UAE and are talking to the State Bank of India (SBI), ICICI Bank and Bank of Baroda (BOB) to start full-fledged businesses in the exchange and offer expert services to diamond traders. We are also in discussions with the UAE Government and the Central Bank to facilitate their operation. The presence of more banks is needed to develop the bourse.” ABN Amro, another leading diamond bank in the world, is also operating in the UAE.
“Diamond banking is a profitable business and we hope to achieve some positive results in 2008. The diamond trade is a capital-intensive business, which involves millions of dirhams for even a modest deal. In the past, traders could run it with family capital but due to the growth of business and changes in the nature of credit, it is not a cash-based business anymore,” Steverlynck said.
“Traders expect credit facilities because their clients are asking for more credit from wholesalers,” he added. Banks give credit for 30 days to 120 days and traders can repay the banks after selling the diamonds. Banks finance the trade by taking the stone as the guarantee.
The Dubai Gold and Commodities Exchange (DGCX) recently appointed Bank of Baroda as a clearing bank for the exchange. Ashok K Gupta, BOB’s Chief Executive Officer, GCC Operations, said: “We are doing diamond financing here only on a selective basis. We have signed a memorandum of understanding with DGCX making us a clearing bank. The partnership will enable DGCX members to open their settlement account with BOB, which is among the few clearing banks of DGCX for settling the accounts of its members.”
The SBI, which is a major player in the Antwerp Diamond Market, has been planning a representative office in the UAE. With more than 30 years of experience in diamond financing, SBI has offices in all the major centres associated with the trade – New York, Antwerp, Toronto, Moscow, Shanghai, Hong Kong, Johannesburg and Angola, and an exclusive diamond branch in Mumbai. Its Tel Aviv branch in Israel was opened in June 2007.
However, the first diamond bank to start operations in Dubai was the Antwerp Diamond Bank, through its subsidiary Diamond Bank Switzerland. Wouter Decoster, the organisation’s Representative Officer in Dubai, said: “With the emergence of Dubai as a regional and international diamond centre, we opened a representative office of our Swiss subsidiary, Diamond Bank Switzerland, a couple of years back, in the Business Avenue neighbouring the DDE. The strong international orientation of the diamond industry and the specifics of diamond finance require close follow up of both the companies being financed and the overall market conditions. The Dubai representative office monitors the specific credit terms and guidelines applicable to the Dubai market.” Decoster added Dubai, because of its ideal location at the heart of an expanding region, its business friendly environment and its state-of-the-art infrastructure, is a very attractive host for the diamond sector.
“Since 1934, the Antwerp Diamond Bank Group offers a comprehensive range of specialised financial services to the diamond industry. Today, as a global diamond banker for a global diamond industry, we have offices in all the major diamond trading centres – headquarters in Antwerp, offices in Mumbai, Hong Kong, New York and our Swiss subsidiary in Geneva.” The group is planning to open an office in Shangai in 2008.
“Diamond finance is done at each of these centres; although governed by local credit guidelines, the lending requires an international perspective,” Decoster added.
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