Murabahah financing requires bank and exporter to sign at least two agreements separately, one for the purchase of goods to be exported and the other for appointing the exporter as the agent of the bank (that is agency agreement). Once these two agreements are signed, the exporter can negotiate and finalize all the terms and conditions with the importer on behalf of the bank. Murabahah pre-shipment export financing against sales contract can be one-time or revolving.
Major phases/procedures
- The customer approaches the bank with the request to financing his/her/its specific export requirement;
- The customer shall present a document which shows the specifications of the exportable goods, information about the price, nature and availability of the goods in the market. Moreover, the customer shall simultaneously present sales contract from the foreign buyer;
- The customer endorses a Master Murabahah Financing Agreement. The cost of the goods and the conditions of delivery are negotiated.
- If the customer, acting as an agent of the Bank, purchases commodities from ECX, all advances shall be channeled through ECX pay-in account, and if the customer fails to buy the intended goods, all the advances shall be credited back to the financing account unless the customer prefers to retain the money in the pay-in account for the next auction. And in this regard the customer shall give a written undertaking letter.
- If the commodity is not traded on ECX floor, the customer purchases the goods on behalf of the bank,
- The bank pays the supplier directly on cash basis;
- At this stage a contract of Murabahah sale is signed between the bank and the customer;
- The bank shall settle the facility (cost plus profit) from the export proceeds of a valid sales contract.
| Unique Features | Specific Eligibility Criteria | |
| The sum of each advances (cost plus profit amount) shall not exceed the limit approved. The export proceed has to be channeled to the exporter's account only through the CBE's IFB window service that maintains the pre shipment facility account The foreign sales contract price should at least cover the advanced amount (cost plus mark-up) The Pre-Shipment Export Credit Facility shall be reviewed every year unless the Bank demands it to be reviewed in less than this period by the Financing Approval Team for any remedial action when the performance of the account is deteriorating. The advance shall be settled from the proceeds of the respective irrevocable Letter of Credit or Cash against Document (CAD). This shall be attentively followed up by IFB-Customer Relationship Manager/IFB-Customer Relationship Officer/Branch Manager to avoid diversion of fund and timely settlement of the advance. | The customer shall present valid Export trade license.
The facility to be availed against sales contract (Confirmed on appropriate receipts.)
The customer should have been engaged in any viable business at least for two years or the customer shall offer collateral i.e. a minimum of 75% of the financing amount for Grade 1 & 2, 85% of the financing amount for grade 3 and 100% of the financing amount for grade 4 and above (fore new exporter).
The applicant shall present valid sales contract/a bona-fide purchase order from a foreign buyer and the method of payment indicated in the sales contract shall be irrevocable letter of credit and/or cash against document (CAD),
The selling price of the exportable item shall be within acceptable range and it shall be confirmed from National Bank of Ethiopia (NBE) or ECX (Ethiopian Commodity Exchange) or the Trade Service process team of the customer's bank or any other sources.
Depending on the nature of the business and the level of risk, the bank may request and/or accept third party personal or corporate guarantee. |
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- Murabahah Post Shipment (Revolving Export) Facility
- Murabahah Mode of Financing Practices in Major Ethiopian Banks
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