In recent years, financial innovation has enabled businesses worldwide to effectively cater to customers’ needs by introducing high-tech financial products designed to reduce barriers to alternative forms of investments. Among the many game-changing financial innovations globally gaining traction is the authorization and facilitation of investments in LBMA compliant, investment-grade gold through digital transactions, utilizing online portals and platforms.
Gold has proven its timelessness as a secure and low-risk asset that hedges against risks such as inflation, market fluctuations, and political unrest while continuing to hold its value and appeal as a portfolio diversifier for investors. Building off physical gold’s economic and financial value, digital gold has quickly become a popular investment tool, owing to its ability to provide customers and investors with liquidity, wealth protection, and risk aversion.
Innovation in digital gold allows individuals to invest in gold bullion and fractional gold using transparent, regulated, and compliant formal channels, such as mobile and digital platforms. This, in turn, eliminates the customers’ need to physically buy and store the gold, as it will securely be stored in a vault insured by the seller; however, the customer can at any time redeem their gold holdings in physical denominations. This, in turn, will increase the accessibility of LBMA compliant gold to a broader segment of the population, grow individuals’ access to the global gold market, allow for seamless transactions, and more importantly, advocate adherence to regulations set by the formal financial system.
When it comes to digital gold or alternative gold-backed investment products in Egypt, the market potential is vast and will gradually gain traction. The introduction of digital gold and a wide range of LBMA compliant gold-backed fin-tech products and solutions in Egypt will support the creation of an enabling, technology-driven precious metals ecosystem through unlocking gold’s untapped hidden wealth and investment potential, with the ultimate objective of enhancing financial inclusion.
The overall benefits of accessing digital gold here should be further complemented by displaying real-time changes in gold pricing and market dynamics, which ensures transparency and informs customers’ investment decisions, as well as act as a content hub that includes data insights and research to educate and support investors and their decisions.
More importantly, the digital gold model should offer a transformative solution to engage with ecosystem players such as financial institutions, microfinancing lenders, digital distributors, and regulators to provide accessible alternative investment opportunities to women and unbanked populations, who often rely on physical gold ownership for financial security, are limited in ability to acquire assets or are constrained by collateral requirements for loans1.
Efforts to establish a gold and precious metals ecosystem should be intrinsically characterized by a holistic, streamlined, high-tech, and customer-centric approach. The ecosystem should cater to every component of the gold supply chain, from providing physical LBMA-compliant gold to assaying labs for purity and quality assessments and logistics services that professionally transport and store gold in secure vaults. Fintech and digital technologies powering the ecosystem will empower the financial services and capital markets, allowing for increased value while introducing new and innovative financial products and services. The infrastructural design of the precious metals ecosystem should be built on technology, quality assurance, compliance, transparency, and security.
With the global population of smartphone owners at 48.2% (~3.8 billion people) 2 and Egypt’s internet penetration rate at 57.3% in 2021, digital gold's range and extent of influence on marginalized and unbanked populations is higher than ever before. The diversified nature, dematerialization, and stable returns of digital gold as an alternative investment can be more attractive for a broader segment of society, utilizing its accessibility compared to traditional investments. Most importantly, it can be alternatively leveraged as a collateral asset for hassle-free online gold loans by digital lenders, who provide quick and innovative loan solutions like microloans and short-term loans that enable unbanked segments to build credit history without risking going into debt. With this credit, the unbanked can build businesses or increase their access to traditional financial services.
Egypt is among the top five countries globally with the largest unbanked population3, currently at 67%4 of the total local population. And although women in Egypt make up nearly half of the population, women’s bank account ownership was only at 27% in 2017 compared to men’s account ownership at 39%. On a regional level, the MENA region hosts the largest percentage of the global unbanked population, with only 29% of the population and 24.5% for women having access to finance5. Consequently, the implications of innovation in gold investments on economic growth and prosperity in Egypt and the region are significant. Gold-backed alternative investment solutions like digital gold are key contributing factors to wealth generation and financial inclusion for women and unbanked communities due to their low entry barrier and convenience.
That said, promoting financial inclusion and women’s economic empowerment is at the forefront of Egypt’s Vision 2030 in alignment with the UN’s Sustainable Development Goals, evident in several nationwide initiatives and policies6. The Central Bank of Egypt (CBE) alone has taken many progressive steps towards boosting financial inclusion, such as mandating in 2020 that all banks in Egypt establish financial inclusion departments and working closely with Egypt’s National Council Women to economically empower women in rural areas across the country by investing in digital technologies that enhance their access to loans, savings, and other financial services7.
The nationwide move towards promoting financial inclusion is undeniable. The introduction of digital gold and gold-backed alternative investment can usher in wider opportunities for financial institutions to drive financial inclusion by pioneering innovative products upheld by our gold ecosystem. Because gold is prevalent in Egyptian culture, leveraging it as an alternative investment will open doors for the underserved to use, grow and save their wealth, promoting economic inclusivity.
The precious metals ecosystem should be built around close collaborations between the government, financial institutions, and partners to set in motion a fast-growing gold ecosystem to serve as a secure and compliant foundation to alternative investment in Egypt and the region. Driving financial inclusion and women’s economic empowerment, digital gold and gold-backed financial products hold out hope for economic and financial prosperity for all Egyptians.