The Malaysian state of Kelantan recently began to issue gold and silver currency for use in circulation. The new gold 8 dinar and silver 10 dirham have values of approximately $1511 and $10 each. Only a few thousand of the coins have been produced so far, but the Pan-Malaysian Islamic Party is pushing local businesses to adopt the currency as an alternative to the Malaysian Ringgit.
At this small scale, minting Islamic silver and gold is almost pure political theater. The coins are likely to have marginal effect on the local economy. Even if all of the coins minted are the silver variety, there will still be only about 1 coin per resident of Kelantan.
The coin specs are a bit hard to pin down, but they appear to be as follows:
Islamic Dinar: 4.25 grams of 22k gold (0.1374 oz AGW)
Kelantan Gold 8 Dinar: 34 grams of 22k gold (1.0991 oz AGW), 32mm diameter
Kelantan Silver 10 Dirham: 10 grams of 99.9% pure silver (0.3527 oz ASW), 41mm diameter
Other sizes may also be available, but these 8 Dinar and 10 Dirham seem to be the primary issues.
Long term implications:
These coins are likely to appear on the collector market and may trade for a premium over their precious metal content. Both the gold and silver coins will likely be produced in very small quantities, which will drive up their rarity. The first run was only 150,000 coins and sold out almost immediately. On a related note; the fineness of these coins is an unknown quantity – while the Kelantan mint will have strong incentives to ensure purity, there is a risk of fraud and counterfeiting.
Similar Islamic bullion coins have been minted in Indonesia for use in Australia, Malaysia and Singapore. These coins have been marketed as compliant with Shariah Law, and are promoted by clerics worldwide. Prominent supporters in London, South Africa, and Canada tout Islamic gold dinars as compliant with Islamic principles of money lending, which forbids charging interest (‘Riba’ ). Islamic banks often ask for a share of profits from the companies that they lend to (‘Mudarabha’), instead of charging fees and fixed interest rates.
In related news, Virginia and Georgia are also trying to return to the gold and silver standard. Isn’t it interesting that the Tea Party and Pan-Malaysian Islamic Party are pushing the same monetary policy?