.Conventional Banks play two very important roles in Exports.  Secondly they provide exportexportfinancing facility to the exporters and charge Interest on this service.  They act as a negotiating bank and charge a fee for this purpose which is allowed in Shariah.

.These services are of two types:  Pre Shipment Financing Shipment Financing  Post As interest cannot be charged in any case. Shariah experts have proposed certain methods for financing exports.

PRE SHIPMENT FINANCING: Pre shipment financing needs can be fulfilled by two methods.  Musharakah  Morabaha .

MUSHARAKAH: The most appropriate method for Financing exports is Musharkah or Mudarbah. Bank and exporter can make an agreement of Mudarbah if exporter is not investing . . Mudarbah. otherwise Musharakah agreement can be made.

as cost and expected profit is known.Agreement in this case will be easy. . and profit that will be obtained by exporting it will be distributed between them according to the prepredetermined ratio. Exporter will manufacture or purchase Goods.

and in this case exporter¶s bank will ultimately suffer.One problem faced by the bank is that if exporter is not able to deliver the goods according to the terms and the conditions of the importer then importer can refuse to accept the goods . .

.This problem can be rectified by including a condition in Mudarbah or Musharakah agreement that if exporter violates the terms and conditions of Import agreement then the bank will not be responsible for any loss which arises due to this negligence.

This condition is allowed in Shariah as rabb-ulthe rabb-ul-mal is not responsible for any Loss that arises due to the negligence of mudarib. .

 MORABAHA Morabaha is being used in many Islamic banks for export financing. which is agreed between the exporter and the importer. . Banks purchases goods that are to be exported at price that is less than the price.

Morabaha financing requires bank and exporter to sign at least two agreements separately.It then exports goods at the original price and thus can earn profit. .

. Once these two agreements are signed.One for the purchase of goods for appointing the exporter as the agent of the bank (that is Agency Other Agreement). the exporter can negotiate and finalize all the terms and conditions with the importer on behalf of the bank.

alternate Shariah compliant procedure is as follows. . POST SHIPMENT FINANCING: Post shipment finance is similar to the discounting of Bill of Exchange. Its Exchange. Exporter with Bill of Exchange can appoint bank as his agent to collect receivable on his behalf.

. Bank can provide interest free loan to the Exporter equal to the amount of bill. and exporter will give his consent to the bank that it can keep the amount received from the bill as a payment of loan.Bank can charge a fee for this service.

Here two processes are separated. Second agreement will be for providing Interest free loan to the exporter. One will authorize the bank to collect the loan on his behalf as an agent. for which he will charge a particular fee. and thus two agreements will be made. and .

.authorizing bank for keeping the amount received through bill as a payment for loan. These agreements are correct and allowed according to Shariah because collecting fee for service and giving interest free loan is permissible.

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