Product Definition
Musharaka LC is a letter of credit issued by Al Rajhi Bank in favor of the beneficiary (exporter) on behalf of the customer-applicant (importer). Al Rajhi Bank commits and accepts to pay against trade documents drawn in compliance with the letter of credit terms. In turn, Al Rajhi Bank’s credit worthiness replaces that of the applicant.
Musharaka works like a limited partnership between Al Rajhi Bank and customers who need to import goods and equipment but do not have the sufficient resources to fund the transaction. In this type of transaction, the customer would provide a defined portion of the funds required and Al Rajhi Bank would provide the remaining funds and issue letter of credit to facilitate the import of the goods. When the goods arrive, Al Rajhi Bank sells its share to the customer on cash payment or deferred basis at an agreed profit margin.
