Sunday, 30 October 2011

Cashing in on gold loans to muslims in East London?

Jewellery shops on Whitechapel Road, Tower Hamlets, East London.

The quest to connect with my gold ETF investment led south from Hackney into Tower Hamlets. Why? Because on Wednesday I heard a report on the BBC about gold in India in which the reporter said gold was in the DNA of indians.

I noticed the journalist had also reported on people panning for gold in the sewers of Dhaka, the capital of Bangladesh.

I wondered if gold was in the DNA of Bangladeshis too and London's highest concentration of Bangladeshis is just a short cycle ride south of Hackney. May be they had a more interesting gold market there.



Inside UKAY Jewellers on Whitechapel Road I was offered £38 for my signet ring (Hackney Jewellers offered between £30 and £40 so nothing special there).

A visit to Bombay Jewellers proved fruitless as they didn't deal in anything less than 22 carat gold.

I asked both if there were any Bangladeshi pawnshops - in Hackney they tended to offer better deals. Both said no adding that Muslims don't pay interest and so they don't run pawnshops or offer loans. I'd forgotten that Muslims don't do interest! It's not halal.

But somebody in Whitechapel must be using pawnshops - a new one was being built two shops up from UKAY (It was Fish Brothers, picture below, which has a branch in Hackney.)

Had I known there was a Money Shop on Whitechapel High Street I'd have asked them. It's right opposite the East London Mosque (For the latest on East End politics you could start here: Trial by Jeory)

Instead I dropped in on the Bethnal Green Road branch where they offered me £45 for the ring (much better than the jewellers). The woman behind the counter was happy to chat and said that she had served a number of Bangladeshi women, usually pawning their wedding jewellery.

I asked if they had been able to reclaim it, she said generally yes, they had. She also said that an interest rate on a loan backed by my signet ring would have cost me just under 8% a month.

The moral of the story?

Hopefully families that are put in a position where they need to pawn jewellery aren't doubly stigmatised by Islamic law. They probably are but I don't imagine it would take much imagination to neutralise the unacceptable interest rate and may be charge a storage cost instead.

It seems that there all sorts of options allowed under islamic law that could easily be applied to pawnshops and give Muslims access without breaking their religious code.

Hopefully a loophole will be found in this lot before the financial crisis drags poorer gold owning muslims into a gold loan dilemma.

That's not to say that taking gold to a pawn shop is good idea. It's not a cheap way to borrow money and that's what I'll look at next.

Anything to do with a gold ETF?

May be not yet.







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