A COMPARISON OF LETTER-OF-CREDIT IN PAKISTAN'S CONVENTIONAL AND ISLAMIC BANKS
Keywords:Letter-of-Credit, Trade Finance, Islamic Banking, Conventional Banking, Differences, Similarity
In overseas trade, a Letter-of-Credit is simply a type of assurance for both the seller and the purchaser. Whether conventional or Islamic, a Letter-of-Credit is the most common payment method used by a purchaser and a seller in a foreign purchase agreement. Currently, a primary inquiry of a study is whether conventional and Islamic banks in Pakistan use letters of credit differently. The goal of this research is to define and compare a Letter-of-Credit's applicability in Pakistan's conventional and Islamic banking practices. To discover parallels and differences between the two techniques. A descriptive analysis was used to answer this study question. The findings of this study, except for the name used in Letter-of-Credit process documents, there are no differences between a Letter-of-Credit application made by conventional and Islamic banks in Pakistan. The instant study also found that, aside from basic agreement that adheres to Sharia rules, the operation of an Islamic letter of credit is relatively comparable to that of a standard letter of credit. Islamic letters of credit are similar to traditional letters. Because the differences between Islamic and traditional letters of credit are purely technical, they have almost the same ingredients. When comparing the Wakalah (Islamic) letter of credit to the conventional letter of credit, these are identical.
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