Ethica Institute of Islamic Finance™

In case of goods being imported by a bank for sale under Murabaha, is it permissible for the promising buyer (client) to guarantee the imported goods?

In general, the bank—who is the buyer of the goods—should accept responsibility and liability for the goods and ensure their safe arrival. However, there are a number of limitations a bank may face, such as inability to deal with defects and shortages in goods and correspondence with exporters with whom the bank is not acquainted.

In view of such limitations, it has been held permissible for the buyer to act as guarantor for goods being acquired by the seller. However, such contracts of guarantee are completely independent and separate from the Murabaha contract. The guarantee given by the client would cover defects in goods, shortages in quantity of goods and any irregularity affecting the value of goods. In the event of any of the aforementioned, the bank may claim its entitlements from either the exporter or client.

However, in instances where the client is willing to absolve the bank of all liabilities resulting from the purchase, it may be prudent to execute the transaction under a different mode of financing, such as a Musharakah or Mudarabah.

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