The Islamic bank has been approached by a client to establish a letter of credit (LC)‎ for the import of goods from another country with a request to finance the import under a Murabahah facility

Fatawa Question

The Islamic bank has been approached by a client to establish a letter of credit (LC) for the import of goods from another country with a request to finance the import under a Murabahah facility. The LC shall have the following payment terms to the supplier (beneficiary of the LC) : A. Twenty percent of the LC amount to be paid as an advance payment ; B. Forty percent upon arrival of the required documents drawn under the LC, representing shipment of goods ; C. Balance 40 % after 60 days from the date of documents arrival. Can the Islamic bank finance the above transaction by way of Murabahah ? If so, will there be separate Murabahah agreements signed with the client for each stage of payment ? Also, how shall the multiple payments to the supplier be treated when it comes to calculating Murabahah profit ?

Fatwa

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Publisher

Islamic Finance News

Publication Date

2013-05-15

Country of Publication

Malaysia

Main Subjects

Economics & Business Administration
Islamic Studies

Data Type

Fatawa

Language

English

Record ID

BIM-784621

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