A documentary credit is defined as a request submitted by the customer to pay for purchases of goods from abroad. It is one of the most important banking services provided by banks, as it is the basis for commercial movement (import-export) all over the world, which is implemented through the correspondent network of banks around the world.
Islamic banks perform this service in two methods:
The first method: is that the customer pays the full amount to the bank, and the bank opens the credit and pays the amount of the credit value in the required currency, and the Islamic bank charges a service fee.
The second method: is the implementation of the documentary credit as a bank credit, in which the customer pays only part of the value of the credit, and the Islamic bank completes the payment of the value of the credit as a credit transaction in accordance with Islamic law in one of the mentioned forms.
Requirements for opening documentary credits:
1- The customer submits an application for the opening of a documentary credit and includes all the required details related to that purpose, supported by documents.
2- The form for opening the credit is organized, as well as the contract for the credit, and it is documented by the customer's signature and seal.
3- Commissions are met according to the bank's banking operations price schedule.
4- Submitting the required insurances and guarantees to the bank.