Import & Export Financing - Import Export Financing...

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By  Ahmed Ali Siddiqui
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Presen Presentation Outline Letter of Credit Import Financing Import Murabaha Import Ijarah Import Musharakah Export Financing Pre-shipment Post-shipment
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Letter of Credit (LC)
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Presen Letter of Credit Conventional  Banks  earn  in  two  ways  while  opening  Letter Of Credit: Service  charges  for  opening  an  LC Interest charged on the LCs not paid on due date 
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Presen Letter of Credit Service Charges Collecting  various  service  charges  (such  as  documentation  charges,  correspondence,  account  maintenance, credit assessment charges etc.) for the  purpose  of  opening  LC  is  permissible  according  to  Shariah.  However  as  per  the  rule  of  Shariah,  bank  cannot  charge for providing guarantee.
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Presen Letter of Credit Service Charges However, these service charges should be developed keeping in view the reasonable cost estimates. For  example  if  the  importer  extends  the  LC,  less service charges should be collected as less services would  be  required  for  extension  in  the  period  of  the LC.
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Presen Letter of Credit Profit in LCs The  bank  may  need to  charge  certain profit  in  case  the LC is not settled by the importer on time, or if the  Nostro  account  of  the  bank  is  debited  before  the  importer has made payment to the bank. In  this  case  appropriate  Islamic  mode  need  to  be  used to charge the profit.
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Import Financing
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Presen Import Financing The  following  modes  can  be  used  for  the  purpose  of  financing Imports: Murabaha Ijarah Musharaka
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Presen Import Murabaha The  Importer  opens  the  LC  from  the  Bank  as  an agent of the Bank.  The Importer places order with the foreign supplier on behalf of the Bank. Upon receipt of documents the Bank makes payment to the foreign supplier. The  Bank  sells  the  goods  to  the  customer  on Murabaha (i.e. cost plus profit basis) and releases the documents. The Importer will pay Murabaha price to the bank on the due date.
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Presen Import Murabaha - Case Case: Import Sight LC (step wise) Bank: First Islamic Bank Clients Name: ICI Pakistan Purpose of Murabaha: Purchase of PTA Murabaha Financing Limit: Rs: 100,000,000/- Profit Rate (IRR): 10% p.a. Tenure: 90 days  Stage 1: MMFA / Agency Date: January 01, 2006 Purchase Requisition Date: January 09, 2006 LC opening Date: January 10, 2006 LC Amount:  $ 1,000,000/-
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Presen Murabaha Receipt of Import Documents Murabaha Agreement LC Established Agency Agreement Payment of Murabaha Price Payment of Purchase Price Steps involved
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Presen Murabaha
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Import & Export Financing - Import Export Financing...

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