3. Murabahah Import Letter of Credit Facility
Murabahah
Import Letter of Credit is a facility that the bank extends for
applicants who engaged in the import business or other applicants who
import for various purposes using the Bank's own funds, at zero
percent margin paid, based on markup agreement. Murabahah financing
requires the bank and the customer/importer to sign at least two
agreements separately; one for the purchase of to be imported goods,
and the other for appointing the importer as the agent of the bank
(agency agreement). Once these two agreements are signed, the importer
can negotiate and finalize all terms and conditions with the exporter
on behalf of the bank.
The
Bank extends one-time or revolving Murabahah Import Letter of Credit
facilities. A One-Time Murabahah Import Letter of Credit financing is a
non-renewable Letter of Credit facility extended to applicants, such
as investors, importers, and others that have no import Letter of
Credit Facility or who want to import over and above the existing
import letter of credit facility limit. Revolving Import Letter of
Credit financing is a form of credit facility where the limit is
reviewed periodically when the customer fulfills the bank's
requirement.
Unique Features
- The financing officer shall strictly follow the general financing processing stages of Murabahah.
- Moreover, the following specific major phases/procedures shall be observed, while processing Murabahah Import Letter of Credit
- The customer requests the bank to open a letter of credit to import goods from abroad through an application enclosing a pro forma invoice and providing all the necessary details and information
- After securing the necessary guarantee and scrutinizing the application, the bank opens a letter of credit.
- The customer endorses a Master Murabahah Financing Agreement. The cost of the goods and the conditions of delivery are negotiated.
- When the shipment of goods takes place and the correspondent bank advices the CBE and sends documents i.e., after the confirmation of the bank's ownership of goods in question through acquisition of related documents, an agreement of sale is signed with the customer.
- The customer settles the L/C document at cost plus profit.
- All costs/charges (e.g. SWIFT charges, L/C opening commission) shall be included in the cost of Murabahah commodity.
- Import Letter of Credit facility shall be reviewed every year unless the bank demands it to be reviewed by the Financing Approval Team before this period for any remedial action when the performance of the account is deteriorating
- The sum of each advances (the summation of each sales price) made by the Bank shall not exceed the facility limit.
- The Bank shall demand security deposit /Hamish Jiddiyah/ in form of cash at least 30% of the L/C opening amount.
- Each advance should be settled within a week from the date of advice.
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