CHAPTER 6 - ISLAMIC TRADE FINANCING

The followings explain how banks facilitate international trading EXCEPT:

• Convert and trade foreign currencies

• Invest money with the companies

• Finance trade between companies and customers located in different countries

• Simplify the process of corporate finance through its overseas branches

Importer sells goods to buyer in other countries

• TRUE

• FALSE

The function of letter of credit:

• A letter offering loan for importer.

• As a guarantee that importer will receive delivery from exporter

• A letter which requires the importer to make immediate payment

• As a guarantee that the exporter will receive full payment from the importer.

In the letter of credit, who is the issuer of the LC?

• Importer

• Exporter

• Importer's bank

• Exporter's bank

Identify the type of Islamic letter of credit (LC):

"Importer is required to deposit a portion of the price with the bank"

• Wakalah LC

• Murabahah LC

• Musyarakah LC

Identify the type of Islamic LC: "Bank makes profit from the mark up price of the goods"

• Wakalah LC

• Murabahah LC

• Musyarakah LC

Identify the type of Islamic LC:"Bank makes full payment using importer's money"

• Wakalah LC

• Murabahah LC

• Musyarakah LC

Which of the following is CORRECT about factoring?

• Factoring company provides loan to the customer.

• Factoring enables company to get immediate cash through the sales of invoice

• Islamic factoring is based on the concept of Bay' Al - Inah

• The debtor must pay the debt to the seller on the due date

Islamic Acceptance Bill Import is based on the concept of:

• Bay' Ad - Dayn

• Musyarakah

• Murabahah

• Ijarah

The following is correct about Letter of Guarantee EXCEPT:

• Islamic letter of guarantee is based on the concept of Kafalah

• Bank is responsible to pay the guaranteed amount in the event of default

• Bank shares profit with the client based on the guarantee given

• Letter of guarantee will improve a company's reliability of performance