PRE-SHIPMENT FINANCE:
Pre-shipment finance as the name suggest, given to finance the activities on an exporter prior to the actual shipment of goods for export. The purpose of such finance is to meet working capital needs starting from the point of purchasing raw materials to transportation of goods for export to foreign country.
Pre-shipment finance is given for the following purposes:
1. Finance for local procurement of goods.
2. Procuring and processing of goods.
3. Packing and transportation of goods.
4. Payment of insurance premium.
5. Payment of utility bill.
6. Payment of wages and salary.
7. Freight charges.
Forms of Financing:
- Back to Back L/C
- Bai-Murabaha TR
- Bai-Salam
- Musharaka.
POST-SHIPMENT FINANCE:
Post-Shipment finance is made by the bank after shipment of the goods by the exporter, by negotiated and purchased of shipping documents. Bank made payment on submission of documents if these are free from any discrepancies and found suitable for purchase in all respect. Bank adjust their liability when get foreign payment. Bank earns exchange income from such finance, which is permissible under Islamic shariah.
Purpose:
- Payment of Manufacturers/Suppliers
- Salary and wages
- Rent
- Utility
- Others
Form of Financing:
- Bai-As–Sarf FDB- Foreign documentary Bill (Former FBN/FBP)
- Musharaka Documentary Bills MDB Inland (Former IBN/IBP)
Nice explanation on Pre-shipment credit and Post Shipment Credit, thanks for sharing it.
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