Islamic Trade Finance

Islamic Trade Finance

Presented by Jamaliah Abd Malik

Objective
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At the end of this session, the participants will be able to
• List down the trade finance-i products available
• Explain briefly the concept applicable

Contents
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Introduction
• What is trade
• Method of payments
Summary of products available with banks
Letter of credit-i
Trust receipt-i
Letter of Guarantee-i

Contents- contd

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Shipping-i
Accepted Bills-I
Bills Purchased-i
Export Credit Refinancing-i
Other products and services

Overview of Trade Transaction

INTERNATIONAL TRADE

Goods

Introduction – Trade transaction

Sales contract

Seller

Description of goods
Method of trade settlement
• Cash
• Open account
• Doc.collection (D/p or D/A)
• Doc. Credit
INCOTERMS
Required documentation
Insurance cover etc

Buyer

Method of Trade Settlement

Methods of trade settlement

Open Account
1.Ships goods

Signs SC

Buyer

Seller
2.

Methods of trade settlement

Advance Payment
1.

Sign SC

Seller

Buyer

2. Ships goods

Methods of trade settlement

Consignment
1. Ships goods

Sign SC

Seller

Buyer
3. Pays
4. Remit Proceeds

2. Sell

Documentary
Collection

Methods of trade settlement

2. Ships goods
Buyer

Seller
1. Sign SC

3. Present docs.

Doc. collection
(sight)/DP
5. Release doc. upon payment/ financing 7. Credit a/c 6. Remit proceeds 4. Forward docs. Bank

Bank

Methods of trade settlement

Documentary2. Ships goods
Collection
Seller

Buyer
1. Sign SC

3. Present docs.

Doc. Collection
(usance)/DA
5. Release doc. upon acceptance

7. Credit a/c 6. Remit proceeds 4. Forward docs. Bank

Bank

Comparison between the Islamic and the conventional banking

Relationship between the customer and the bank

Islamic Banking

• seller and buyer • Lessor and lessee PROFIT

Conventional
Banking

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