Ruling on letter of credit
Fatwa No: 97244

  • Fatwa Date:24-6-2007 - Jumaadaa Al-Aakhir 9, 1428
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Question

aslamu alikum warahmatullah wa barakatuho, 1- is letter of credit or documentry credit permissible in islam?. what are the muslim seller responsiblities in letter of credit?.

Answer

All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad  sallallaahu  `alayhi  wa  sallam ( may  Allaah exalt his mention ) is His slave and Messenger.

 

The letter of credit which the banks issue is permissible in principle, because it is either a warranty or an authorization and both are Islamicly permissible provided there is nothing which invalidates them; this is what the Islamic Fiqh Committee declared.

However, we did not understand what you meant by the seller responsibilities in a letter of credit. Nonetheless, it is known that the letter of credit is a contract between the customer and the authority which issued it, therefore, if this letter involves paying a charge or administrative fees, then it is the customer who is obliged to pay them and not the seller. 

Allaah Knows best.

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