Strengthening your credit

Letters of Credit have become a crucial aspect of trade after traditional payment methods became impossible. In the modern business world, there is no international trade without them. Reduce your risk of non-payment and advance your business with confidence.

  1. Import Letter of Credit
  2. Export Letter of Credit
  3. LC Musharaka
  • Export Letter of Credit
  • Import Letter of Credit
  • Musharaka Letter of Credit

The importer’s bank irrevocably commits to payment provided that the exporter complies with the terms and specifications of the letter of credit. Al Rajhi Bank advises and negotiates documents and undertakes payment to the exporter, acting on the exporter’s behalf by adding its confirmation to the letters of credit, if required (confirmation of letter of credit).

Features and Benefits

  • The exporter has a bank commitment to pay against compliant documents, instead of running the importer’s commercial risk.
  • Product is used when the exporter is not very familiar with the importer or does not want to assume the political risk of the importer’s country This product perfectly suits those exporters who need to manage their commercial and cross-border risks.

Transaction Mechanism

  • Al Rajhi submits export letters of credit authenticating and advising the establishment of the letter of credit to the beneficiary (exporter, Al Rajhi’s client).
  • The bank manages the collection cycle for the beneficiary through its extensive network.
  • Al Rajhi Bank confirms irrevocable letters of credit where the bank undertakes to honor the credit, assuming all terms and conditions have been complied with.

An instrument issued by Al Rajhi Bank in favor of a beneficiary (exporter) on behalf of the applicant (importer), Al Rajhi Bank commits to pay (accept to pay) against trade documents drawn in compliance with the letter of credit terms. Al Rajhi Bank’s credit worthiness replaces that of the applicant.

Features and Benefits

  • The importer ensures that payment will only be undertaken of the exporter complies with the terms and specifications of the letter of credit.
  • Security to the Exporter if there are risks involved or political concerns.
  • Immediate notification to importer upon receipt of documentation.
  • Importer improves his negotiating position through Al Rajhi Bank’s payment guarantee.

Transaction Mechanism

  • Al Rajhi Bank issues, amends, confirms and pays both sight and acceptance letters of credit through its extensive network of correspondent bank relationships.

Musharaka LC is a letter of credit issued by Al Rajhi Bank in favor of a beneficiary (exporter) on behalf of the applicant (importer). Al Rajhi Bank commits and accepts to pay against trade documents drawn in compliance with the letter of credit terms. In turn, Al Rajhi Bank’s credit worthiness replaces that of the applicant.

Musharaka works like a limited partnership between Al Rajhi Bank and customers who need to import goods and equipment but do not have the sufficient resources to fund the transaction.

In this type of transaction, the customer would provide a defined portion of the funds required and Al Rajhi Bank would provide the remaining funds and issue LCs to facilitate the import of the goods.

Features and Benefits

  • Importer needs to contribute only a portion of the funds required for import.
  • Importer is assured that payment will only be made to the exporter only when he complies with the terms and conditions of the letter of credit.
  • Importer can defer payment to the bank on arrival of the goods as per prior agreement with the bank.
  • Immediate notification to Importer upon receipt of documentation.
  • Importer improves his negotiating position through Al Rajhi Bank payment guarantee.

Transaction Mechanism

After the Musharaka LC is opened, when the goods arrive, there are three options available to the importer:

  • Al Rajhi sells its share in Musharaka to the customer on cash payment or deferred basis at an agreed margin
  • The customer sells its share to Al Rajhi Bank on a cash payment or deferred basis.
  • Both sell their shares in the market together.

How to Apply

  • Am I Eligible

Eligibility & Criteria

  • Self employed, small businesses, establishments, Limited liability companies (LLC) and private companies
  • Commercial account with Al Rajhi Bank

Required Documents

  • Completed Application Form
  • Request letter on applicant's letterhead

FOR ENQUIRIES CALL:

tel:+800 124 1222

More benefits related to Letters of Credit

  • Lower the risks on trade transactions

    We substitute our financial strength for that of your company giving you the potential to negotiate better prices with your suppliers.

  • Tap into our network

    As one of the world's largest and most recognized Islamic banks, our reputation precedes us. Enhance your creditworthiness with our Letter of Credit.

  • LC tracking service

    Track the status of your Letter of Credit at any time through our eTrade website.

Download Letters of Credit Application Forms

Frequently Asked Questions:
Letter of Credit
  • What is the advantage of using a LC?
    It is used to secure payment for the seller and protects buyer by evidencing goods that have been shipped/ transported.
  • What are the international customs governing letters of credit?
    Uniform customs and practices for documentary credits ( ICC publication 600 ).
  • What are the Uniform customs and practice for Documentary credits ( UCP )?
    The UCP is a set of internationally recognized rules for documentary credits published by the International Chamber of Commerce (ICC) in France, these rules are used in the international trade community for determining the roles and responsibilities of all parties involved in Letters of Credit.