An Islamic bank has issued a letter of credit which had a usance period of 90 days. The bank also agreed with the customer to finance the import under the letter of credit through Murabahah for a further 90 days

Fatawa Question

An Islamic bank has issued a letter of credit which had a usance period of 90 days. The bank also agreed with the customer to finance the import under the letter of credit through Murabahah for a further 90 days (i.e. to allow an additional 90 days upon completion of supplier’s credit of 90 days). Upon the arrival of the documents from the supplier’s bank, the customer signed a Murabahah agreement with the bank which stipulated that the customer would pay the Murabahah sale price 180 days from the date of signing the Murabahah agreement. After few days, the customer requested the bank to pay the invoice amount to the supplier after 30 days instead of 90 days, i.e. reducing the usance period to make it 30 days. The customer has also offered to increase the Murabahah amount to compensate the bank for early payment. Shariah guidance is sought on how to deal with this situation.

Fatwa

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Publisher

Islamic Finance News

Publication Date

2013-09-18

Country of Publication

Malaysia

Main Subjects

Economics & Business Administration
Islamic Studies

Data Type

Fatawa

Language

English

Record ID

BIM-783626

• APA
• MLA
• AMA