Documentary Credits and Bills
The Commission considered the exchange rate difference in financing letters of credit which is different at repayment of the correspondent bank on date of the sale of goods to the client, and answered by the commission as follows: When financing letters of credits, the client shall not be borne by the exchange rate difference between the rate on signing of Murabaha contract and the price of repayment to the correspondent bank on maturity date, because it is then merely postponed usury, and leads to price foolishness of the Murabaha sale, and the price foolishness spoil the contract, and so as the bank not to lose the exchange rate, the Commission has recommended management to conclude the Murabaha contract on the same currency the will be paid to the correspondent Bank, and if he wishes selling in a currency other than the currency of payment, the Commission recommends management to apply the solutions mentioned in the legitimacy standards, where stated in the standard No. (1) trading in currencies (2/4): ((the institution has the right to protect against depreciation of the currency in the future to resort to the following: (b ) purchase of goods, or conclude Murabaha transactions in the same currency)). (2/5): ((the institution and the client may agree when fulfilling installments of deferred operations (such as Murabaha) to repay in another currency at the repayment date rate.
Question: Is it permissible to repay credit in foreign currency and fix the client's debit in the Syrian currency, whereby the exchange rate on the date of repayment to the correspondent bank, and the client pays in the Syrian currency for installments.
Fatwa: If relying outlet on Murabaha basis, then the price of the goods will be based on the exchange rate on the signing of Murabaha sale, and if the credit was self-financed, and the client did not repay the credit value on maturity, and the bank is forced to pay off the credit value in a foreign currency, then it is not permissible to fix the exchange rate in the Syrian Pound, but the client still owes in the currency Cham Bank repaid the correspondent Bank, and the client may repay the debt in the Syrian Currency where the exchange rate should be on the debit repayment date and not before.
Question: On granting the credit , Is it permissible for the bank to take an undertaking from the customer to bear the difference between the exchange rate on repayment date for the Correspondent Bank and the exchange rate of the installment payment date?
Fatwa: The bank may not take an undertaking from the client to bear the exchange rate difference because the credit if it was executed according to the Murabaha basis, the exchange rate is determined on a the Murabaha contract conclusion, the client may not undertake to the point of obligation to bear the exchange rate difference because this leads to price foolishness, but if the client of the bank donated a sum of money for the exchange rate difference then so be it. If the credit was on self-financing by the client, and the client has not paid off the credit value so is not permissible to take a pledge of commitment from the client to bear the exchange rate difference, because the exchange rate is date when the client repays the bank debit.
Main Branch - Al Najmeh Square
Tel. : 00963-11-33919
Call center :00963-11-9398
Fax : 00963-11-3348731
P.O. Box: 33979 D
The capital of Cham Bank has been increased 10,000,000,000 Syrian Pounds and registered at the Commercial Register under No.14809 dated January the 24th 2007(the 5th of Muharram 1428), and registered at the Syrian Central Bank under No. 15.
Cham Bank is the first Islamic bank in Syria to take the Islamic Sharia approach. The Bank s operations and activities (With Keeping customer’s names anonymous) are subject to the Central bank of Syria and the Islamic committee monitoring.