Modes of Import financing by Islami Bank.

(i) Import of goods by Letter of Credit: A Letter of Credit (L/C) is a conditional undertaking to the exporter (Seller) by a bank on behalf of his customer (Importer/buyer) to pay the bill amount, if all the terms & conditions of the L/C are fulfilled. By issuing a L/C, a bank undertakes the full responsibility of payment, if otherwise in order. Since bank takes the liability of payment against some percentage of margin from the importer, which may be in cash or collateral or both cash & collateral depending upon banker customer relationship – so it is an Import financing.

(ii) Murabaha Import Bill (MIB): Payment made by the bank against lodgement of transport documents of goods imported through L/C is called MIB. It is an interim investment for a maximum period of 21 days connected with import and is generally liquidated against payment usually made by the party for retirement of the documents for release of imported goods from the customs authority. In conventional banking this type of investment is called Payment Against Document (PAD).

(iii) Mudaraba Post Import (MPI): Normally importer pay the duty & sales tax of the impoted goods after arrival at the port. Due to shortage of fund or some other reasons, sometimes importer approach the L/C opener bank to assist him for retirement of the imported goods. In some cases importer do not come forward to retire the goods. In these cases the L/C opener bank themselves arrange to retire the goods by pledge in Godown under bank’s lock & key. This type of payment (forced loan) is called MPI. This is a temporary arrangement for a maximum period of 90 days. Within this time limit, the importer borrower will release the goods at a time or gradually after making payment to the bank. In traditional banking this type of investment is called LIM (Loan against Imported Merchandise) or LAM (Loan Against Merchandise)

(iv) Murabaha Trust Receipt (MTR): It is a type of investment allowed by a bank on trust to his experienced, reliable & reputed importer for retirement of shipping documents and release the imported goods. Under this arrangement the importer borrower will deposit the sale proceeds of imported goods which are under his control at a time or gradually within a maximum period of one year. In traditional banking this type of facility is called Trust Receipt (TR).

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