The LC-i / DC can be issued under 2 contracts:
Al-Wakalah refers to any agency relationship where a Bank acts as an agent on behalf of a company or individual.
- Revolving in nature;
- The Bank at its discretion may grant Ibra´ or rebate on any financing amount unutilized.
- The customer pays in advance the DC value (100% deposit);
- Undertaking of payment by the Bank;
- The Bank acts as an agent of the customer. There is no financing from the Bank.
Al-Murabahah refers to the sale of good at a price, which includes cost plus as agreed by both seller and the buyer.
This is a contract where the commodity exchanged for is delivered immediately and the price is paid in lump sum at a later date.
- Purchase goods on credit and enjoy the cash price from the supplier;
- Obtain financing from the Bank;
- Pays the bank on deferred term;
- Undertaking to pay by the Bank;
- The Bank appoints the customer as purchasing agent;
- Upon arrival of the complied documents, the Bank pays the negotiating bank by utilizing its own funds;
- The bank sells the goods to the customer (purchasing agent) at a selling price comprising its cost and profit margin.
Settlement by customer on deferred payment;
- Bank provides financing.