{"id":5690,"date":"2023-07-06T15:30:12","date_gmt":"2023-07-06T15:30:12","guid":{"rendered":"https:\/\/ethis.co\/blog\/?p=5690"},"modified":"2023-07-07T09:33:49","modified_gmt":"2023-07-07T09:33:49","slug":"islamic-trade-finance","status":"publish","type":"post","link":"https:\/\/ethis.co\/blog\/islamic-trade-finance\/","title":{"rendered":"Islamic Trade Finance"},"content":{"rendered":"\n

By Zaki Ahmad<\/em><\/strong><\/p>\n\n\n\n

A research scholar pursuing a PhD in finance and banking at Universiti Utara Malaysia <\/em><\/strong><\/p>\n\n\n\n

In international trade, importers and exporters have conflicting interests as far as the payment is concerned. Importers prefer to pay upon the receipt of products and exporters prefer to be paid upon product shipment. In such scenarios, it is crucial that both parties have a trustworthy business relationship. <\/p>\n\n\n\n

The first option is to have an open credit arrangement. This usually requires longstanding trade relationships and robust creditworthiness. Secondly, parties can use direct cash payments. This method is suitable when there is only cash payment. Therefore it is unsuited when there is a credit term involved in the transaction.<\/p>\n\n\n\n

However, the transactions are neither solely based on cash terms nor always between trusted partners. To solve this issue, various intermediaries such as banks and financial institutions can facilitate the process by providing trade financing. Reputable banks act as a bridge to resolve this conflict and thus by providing ease of doing business, trade finance enables international trade. These banks extend credit or payment guarantees that reconcile the cash flow needs of both exporters and importers.<\/p>\n\n\n\n

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Table of Contents<\/p>\n