One of South Africa's 'big five' banks says it will offer Sharia compliant letters of credit (L/Cs) alongside several more new Islamic banking offerings.

Demand for Sharia compliant import finance from business customers in the country is growing according to FNB, which says this is why it has launched trade finance offerings as part of its broader range of Islamic banking products.

Banking arrangements

FNB's Islamic Trade Finance offering is modelled on the Murabaha arrangement in which the bank agrees to purchase and assumes legal possession of goods being imported and sells them to the customer upon delivery.

The importer is tasked with arranging transport and logistics for the purchase and receipt of goods from the exporter.

Product range

Islamic finance products offered by FNB include import L/Cs, foreign bills for collection, forward exchange contracts, guarantees and open account payments.

FNB's head of Islamic banking, Amman Muhammad, says "the launch of a trade finance offering cements our commercial Islamic banking value proposition."

"There's strong appetite in the market for Islamic trade finance products amongst South African businesses. Therefore, access to this finance will create opportunities for more businesses to actively participate in trade activities," he concluded.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.