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عربى
Murabaha LC

This product will follow the Islamic concept “Murabaha”. Murabaha is defined as a purchase & sale transaction wherein the first party (financing party) purchases, on the basis of a prior undertaking from the customer (the purchasing party) called Promise to Purchase, the asset subject of the Murabaha in its own name, and possesses it to resell it to the customer at its cost plus a profit margin agreed upon in the Promise.

The customer requests the bank to open, in the bank’s name, an irrevocable LC to receive all documents representing and evidencing title and possession of the described goods in accordance with the terms set out for the LC. This will be against the customer’s promise to purchase the imported assets/goods. When the customer approaches the bank for purchase of the assets/goods imported, the Bank and the customer sign the Murabaha contract in line with the pre-agreed terms and condition and settle the Cost of Goods Purchased and create Receivables under sold goods/assets.

The issuance of LC is considered as a service being provided by the bank against fees and service charges. Upon receipt of documents and retirement of the letter of credit, the LC transaction is reversed and the payment is effected by the bank to the supplier by debiting Cost of Goods Purchased.

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