The trade finance department of an Islamic bank is facing an unusual situation in an already executed Murabahah transaction with one of its customers

Fatawa Question

The trade finance department of an Islamic bank is facing an unusual situation in an already executed Murabahah transaction with one of its customers. The background of the transaction is that the customer approached the Islamic bank requesting for a Murabahah in order to finance the procurement of electrical goods from abroad from time to time on a documentary collection basis (i.e. without establishing the letter of credit). Documentary collection is an international trade procedure in which a bank in the importer’s country acts on behalf of an exporter for collecting and remitting payment for the shipment of an agreed consignment. The exporter presents the shipping and payment documents to its bank (in its own country) which sends them to its correspondent bank in the importer’s country. The foreign bank (called the presenting bank) hands over shipping and title documents (required for taking delivery of the shipment) to the importer in exchange for cash payment. The bank had already accepted the request by appointing the customer as its agent to negotiate and finalize the purchase of consignments from an identified set of suppliers up to a certain limit, and thereafter had started to receive the documentary collection documents in the name of the agent (customer). In this particular instance, having found no discrepancy in the collection documents, the bank effected remittance of the total value of the consignment to the supplier’s bank, and signed the Murabahah agreement with the customer, thereby delivering the shipping documents to the customer after appropriate endorsement, thus enabling the customer to get the goods released from port. After a lapse of a week, the customer approached the Islamic bank with the information that due to a mistake at the supplier’s end, the amount claimed by it in the invoice was less by about 15 %, which needed now to be sent to the supplier. The bank also received a message from the supplier’s bank to that effect along with the revised invoice. Shariah guidance is sought to deal with this unusual situation in a Shariah compliant manner.

Fatwa

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Publisher

Islamic Finance News

Publication Date

2013-10-17

Country of Publication

Malaysia

Main Subjects

Economics & Business Administration
Islamic Studies

Data Type

Fatawa

Language

English

Record ID

BIM-783612

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• MLA
• AMA