Search Islamic Finance Answers

1,000+ scholar-approved answers and growing...

When The Client Is Unable To Pay

What happens when the client is unable to pay all or part of the money due for the value of goods imported by means of documentary credit?

If the client pays a portion of the money due for the goods the bank may enter into a contract of partnership with the client in which each partner’s percentage of ownership will be based on the amount each paid for the goods so that this amount will represent the partnership’s capital investment. If the client is unable to pay anything, it is lawful for the bank to buy the goods from the client at a mutually agreed upon price and sell it to a third party. In this case all the profits accrue to the bank alone. Alternatively, the bank may take the goods as collateral in return for the amount it paid out and then sell it to a third party to settle the client’s account and use the proceeds to pay the seller.

7 Day Free Islamic Finance Course

Please enter your first name and email address to start receiving your CIFE™ lessons instantly!

We value your privacy. We will never rent, sell, or spam email addresses.

ASK AN ISLAMIC FINANCE QUESTION

Each question is reviewed by an Islamic finance expert and approved by a scholar.

Ask Now »

SEARCH ISLAMIC FINANCE Q&As

Browse one of the world's largest database of Islamic finance Q&As available online.

View details »

What’s New at Ethica

Press releases, live events, book recommendations, discount offers, and more

View details »