Professional Documents
Culture Documents
Comparison :
Subject to 2 tier interest rate
Cost opening commission plus the 2
Features :
Features :
a) Murabahah LC
a) Revocable LC
Customer does not have required
The beneficiary to a trade
funds to finance purchase.
transaction naturally would like to
Bank issues LC to seller.
have a more definite undertaking
Bank makes full payment of
from his buyer before he ships his
purchase price to seller.
goods.
Bank immediately sells goods to
The negotiating bank if it has
customer (actual buyer) at a marknegotiated documents in full
up for deferred payment.
compliance with the credit before
receiving notice of amendment or
b) Musyarakah LC
cancellation of credit.
Customer and bank agree to profit
share.
b) Irrevocable LC
Bank issue LC to seller.
This undertaking cannot be
Bank and customer contribute to the
amended or cancelled unless with
payment of the purchase price.
the consent of all the parties
Proceeds of the subsequent sale are
concerned.
shared based on pre-agreed profit An irrevocable LC may or may not
sharing ratio.
be confirmed.
c) Wakalah LC
The clients inform the bank of his
LC requirements and request the
bank to provide the facility.
The client appoints the bank as its
agent for the purpose of executing
the transaction.
The bank requires the client to
place a deposit to the full amount of
the price of goods to be purchased,
which it accepts under the principle
of Al-Wadiah.
The bank established the LC and
makes payment to the negotiating
bank representing the counterpart,
utilizing the clients deposit.
The bank charges the client fees and
Modus Operandi
1) Murabahah LC
2) Musyarakah LC
3) LC and Wakalah LC