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GUARANTEES

TRADE FINANCE

GUARANTEES

Different kind of guarantees are encountered in trade business including bank guarantees, performance guarantees, bid bonds, standby letters of credit, shipping guarantees, etc.
In terms of shariah, providing a financial guarantee comes under the ambit of Kafalah which refers to a contract in which one assumes another’s liability with a recourse. If you are ever required to produce a guarantee, Rizq will act as a guarantor on your behalf as long as the guarantee is being used for a shariah compliant purpose.

ISLAMIC ALTERNATIVES FOR SHIPPING GUARANTEE

KAFALAH

A financial liability or obligation of the guaranteed party that is already established or that will be established in the future. it is a Performance of a certain act by the guaranteed party and Fulfillment of an obligation by the guaranteed party. Party A purchase goods form Party B on credit basis. While issuing goods on credit, Party B asks for payment guarantee from guarantor. Here guarantor can be a bank or any legit party, who will provide payment assurance to the party B, in case, default of payment from the party A. It can be used by the importer in the bank guarantee, letter of credit and shipping guarantees. Kalafh can be used in other Islamic contracts like Mushrakha, Murabaha, Salam and Ijaraha. It provides payment protection to both importer and exporter.

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