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2851. There is no objection in taking money from non-Islamic banks whose reserves are supplied by k¡firs, regardless of whether it is a government owned bank or a privately owned bank. There is also no objection in depositing money in such banks and acquiring interest from them. A person may also take the sum of the interest with the intention of restitution.

Letters of credit are of two types:
1. Letters of credit for import: A party wishing to import goods from a foreign country must—according to trade agreements—obtain a letter of credit in the importer’s country. By issuing a letter of credit, the issuing bank agrees—either through correspondence or by engaging the seller’s representative in the importer’s country—to pay the seller the amount agreed upon by both parties owing to the proforma invoice that was issued by the seller—containing a complete description of the goods, both in terms of quality and quantity—through a bank in the seller’s country, after the completion of the transaction.
The bank also charges the importer a fee, which is a percentage of the entire value of the requested goods, such as 10 or 20 percent.
The bank then informs the seller of the completion of the transaction, so that the seller may submit the shipping documents to the bank and acquire the payment for the goods. Upon acquiring the shipping documents which are in accordance with the description of the goods agreed upon at the time of issuing the letter of credit, the bank transfers the entire payment to the seller.
2. Letters of credit for export: If a party wishes to export a product to a foreign country, the importing party needs to—according to trade agreements—obtain a letter of credit from a bank in his country. Thereafter, when the aforementioned steps—outlined for issuing a letter of credit for import purposes—have been executed, the bank establishes a link with the exporter, and ensures that the product is delivered to the buyer and the payment is delivered to the seller.
Therefore the process for issuing a letter of credit for importing and exporting purposes is the same.
Sometimes the exporter, its representative or deputy presents documents describing the type, quality, quantity and other specifications of the goods to the bank without a prior agreement with an importer, and deputizes the bank to present those documents to potential buyers. Thereafter, should a buyer accept to buy the goods at the specified price, he will request for a letter of credit. The bank then goes through the process of ensuring the delivery of the product to the buyer and the payment to the seller as elaborated above.

2852. Issuing a letter of credit for a buyer, and accepting a letter of credit by a bank, and carrying out the terms and conditions of the letter of credit, are all permissible.

2853. It is permissible for the bank to acquire a payment for issuing a letter of credit and carrying out the terms and conditions of the letter of credit.
The matter of issuing a letter of credit and taking payment for it can—from the view of the shari’a—occur as an instance of various headings, of which three are mentioned below:
1. It can be an instance of hiring, wherein the applicant hires the issuing bank to issue a letter of credit, and considers the sum paid to the bank—which is a specific percentage of the value of the imported goods, as agreed upon by the bank and the applicant—as hiring wages.
2. It can also be an instance of ju‘¡lah, wherein the applicant comes to an agreement with the bank that, should the bank issue a letter of credit to him, he will pay a specific amount to the bank. Hence, once the bank has issued the letter of credit, it reserves the right to acquire that sum from the applicant.
3. It can also be an instance of a sale, wherein the bank pays the requested amount to the seller in the seller’s local currency according to the foreign exchange rate. In return the issuing bank acquires payment for it from the applicant and the buyer in their local currency. It then sells the foreign currency that it bought on behalf of the importer, along with the profit (to the importer), and since the trade of money for money involves two different currencies, there is no problem in it.

Sometimes the bank stores the imported goods on behalf of the importer. Once an agreement has been concluded between the importer and the exporter, the payment has been made to the seller, and the goods and documents have arrived in the importing country, and the bank informs the buyer that the shipment of goods has arrived, but the buyer delays in collecting the shipment, the bank stores the goods on behalf of the buyer. In return, the bank charges storage fees to the buyer.
Sometimes the bank stores the goods on behalf of the exporter. The exporter may ship the goods and documents to the bank, without any prior agreement with a buyer, so that the bank may offer the goods to the businesses within a country. However, a buyer for the goods cannot be found, and the bank stores the goods for the exporter. In return, the bank charges storage fees to the exporter.

2854. In both the aforementioned cases, wherein the bank stores the goods for the importer or the exporter, given that the storage fees are according to a condition stipulated within the agreement, even if it be unwritten, as in it is understood by both sides and neither of them are oblivious to it, which is usually understood in such transactions, then it is permissible to acquire payment for storing the goods. The same will apply if the goods are stored at the request of the importer or the exporter.
In cases other than these, the bank does not reserve any right to acquire any payment for storing the goods.
In the event that the bank ships the goods and transfers the documents according to an agreement between the exporter and the importer, and the bank informs the importer that the documents have arrived, but the importer fails to take possession of them, then it is permissible for the bank in order to reclaim its right, which is the amount that was paid to the seller, to sell the goods to another party, which is based on the discretion that the importer grants to the bank in such cases.

Sometimes an individual agrees to undertake a project for the government or a private individual in his capacity as a contractor, such as constructing a school, a hospital, a street or any similar project. The contractee (obligee) may request for a surety bond for a particular amount from the contractor (principal) in order to be confident that the contractor will complete the task according to agreement. In the event that the contractor fails to complete the project or fails to complete it according to the terms of the agreement, the contractee may recover any potential losses owing to the breach of contract through the surety bond, and acquire the specified amount.
In such a case, a contractor applies for a surety bond for an amount specified by the contractee, and in return the bank issues the surety bond after acquiring the necessary guarantees. The bank also charges a fee for issuing the surety bond that is proportional to the amount that it guarantees on behalf of the contractor.

2855. A security agreement (surety bond) is realized through any means that signifies it, be it verbal, such as an offer and an acceptance, or non-verbal. It will also make no difference if the issuing bank guarantees the contractee that the contractor will pay the secured amount (payment bond), or guarantees that the contractor will act according to the terms and conditions of the agreement (performance bond), and in the event that he fails to do so, he will pay the secured amount.

2856. It is mandatory upon the contractor to fulfill the stipulated condition of paying the amount of the bond in the event of a breach of contract, given that the condition is stipulated within the contract. In the event that he fails to pay the bond amount, the employer may refer to the issuing bank. Since the surety bond was issued at the behest of the contractor, he guarantees the bank to pay the amount. The contractor must pay whatever the bank pays, and the bank reserves the right to demand the payment from him and acquire it from him.

2857. The specified fee or premium that the banks demands from the contractor in return for issuing a surety bond is legal, and the transaction of the bank with the contractor can be legalized through many ways. One of these ways is that it takes the form of a hiring contract, wherein the contractor hires the issuing bank for a specific wage to perform the aforementioned task. It can also take the form of a ju‘¡lah, wherein the contractor pays the wages as a ju‘l in return for the aforementioned task.

Sometimes a corporation employs a bank as a broker for selling its shares and bonds. Upon receiving an agreed and specified fee, the bank proceeds to sell the shares and bonds in its capacity as a broker.

2858. Such agreements with a bank are legal. It may take the form of a hiring contract, wherein the corporation pays the fee to the bank in return for hiring the bank for brokering its shares or bonds. It may also take the form of a ju‘¡lah, wherein the corporation agrees to pay the specified amount to the bank should it perform the aforementioned task for the corporation. In both cases, the bank reserves the right to acquire the specified fee upon performing the aforementioned task.

2859. Buying and selling the shares of a corporation that does not engage in illegal transactions, such as interest-based transactions, is permissible. However buying and selling the shares of a corporation that engages in illegal transactions, the profits of which constitute the capital of the corporation, is not permissible. In cases other than this, it is permissible to buy and sell their shares, however one must refrain from their illegal income.

Money transfers are of various types:

1. The client ({^ The term client in this article denotes an individual who holds an account at the bank or an individual who refers to the bank for a service.^}) who has deposited money with the bank, requests the bank to issue a banker’s cheque or a money order written out to a participating bank, which may be located within or outside the country. He may also request the bank to transfer an amount to another branch of the bank in a different city or country, and the client would acquire that amount in that location. In this case, the bank has the right to collect a fee for performing these tasks.
The act of collecting a fee can be legalized by noting that since the bank is not obligated by the shari’a to pay the deposited amount to the client in a different city or country, and reserves the right to abstain from paying the client in a place other than the place where the money was deposited, it may collect a fee from the client for relinquishing this right and paying the amount to him in another city or country.

1. The client has not deposited any money with the bank. However, the bank issues a cheque or a money order so that a participating bank may give a loan to its client within the country or outside the country. The bank may also want the manager of another branch (of the same bank) to give this client a loan. This act is an act wherein the issuing bank deputizes its counterpart or the manager of another branch to give a loan to its client, or deputizes the client to acquire the money and possesses it as a loan. The bank may therefore collect a fee from the client for the act of deputizing.
In the event that the aforementioned sum is paid in a foreign country in a foreign currency, and the client loans the amount from the bank in the manner that was mentioned above, the bank reserves the right to demand the debt in the foreign currency. It may choose to relinquish its right in return for a specific fee. It may also choose to exchange the foreign currency for the local currency for a specific return.

3. A client deposits a sum of money with the bank so that he may acquire an equivalent amount within the country or in a foreign country. For example, he deposits an amount with the bank in Najaf, so that he may withdraw it in Baghdad, Syria, Lebanon or any other foreign country. In turn the bank charges a fee for rendering this service. This service offered by the bank, and acquiring a fee for it is permissible. The reason for the permissibility of this act is that the forbidden interest in a loan is the extra amount that the creditor takes from the debtor. However, if the debtor takes an extra amount from the creditor, it is entirely permissible. In the event that the two sums are of two different currencies, such as the Canadian dollar and the British pound, the bank may sell the foreign currency for a higher amount of the local currency.

4. A client acquires some money from the bank in one location, and thereafter without any compulsion or request from the bank, the client requests to pay that amount to the bank at another location. The bank in turn charges a fee for accepting this request. In this case, it will be permissible to acquire this fee in one of two ways:
I. If the two sums are of two different currencies, such as a person who acquires Canadian dollars from the bank, and in return the bank accepts the amount in another currency, then in effect the bank is exchanging the non-Canadian currency along with the fee, for the sum that it gave to the client.
II. Since the bank is not obligated by the shari’a to accept the given amount at another location, and has the right to reject the request of the client, it may choose to charge the client a fee for relinquishing its right.

2860. The various forms of money transfers by the bank, and the corresponding jurisprudential designations that were applied to it, are also applicable in the case of individuals. An example of this is a case wherein an individual loans an amount of money in a particular location to another individual, so that he may acquire the sum or its equivalent at another location, along with an additional amount. Another example is if he takes an amount at a location from an individual, and returns its equivalent along with a little extra in another city or another country.

2861. In the case of money transfers, it makes no difference if the one transferring the money has a sum deposited with the individual or the bank which will transfer the money for him, or not. In both cases, the transfer of money is valid.

Sometimes a bank will offer a prize for the purpose of encouraging people to open an account with them, or to encourage clients to deposit more of their money with the bank. The winners for these prizes are selected by a draw.
2862. Bank prizes are of two types:
a. The bank is not obligated by a condition to hold a draw, rather the draw simply acts as an incentive. In this case it is permissible to hold a draw, and the person who wins the draw is permitted to take the prize, even though the more precautious measure in the case of banks which are owned by the government or a group of people, is that the individual should take the prize with permission from the hakim al-shar‘iyy.
b. The bank is obligated by a condition to hold a draw, and the bank holds the draw in order to honor the condition. In this case, it is not permissible to hold the draw, and similarly, it is not permissible for the person who won the draw to take the prize.

One of the services that a bank may provide to its clients is the realization of a bill of exchange in the following manner: prior to the due date, the bank informs the drawer of the presence of the bill at the bank, along with its number, amount and due date, so that the drawer may prepare the funds to honor the bill of exchange. Once the bank acquires the funds, it deposits the amount in the account of the drawee, or pays it to him in cash. It also charges a fee for rendering this service.
One of the other services offered by a bank is cashing the checks presented by its client to the bank. The bank may charge a fee for rendering this service.

2863. Processing bills of exchange and charging a fee for it can take certain forms:
1. The drawer has deposited money with the bank, and there is a condition within the bill of exchange that the payee should take the bill of exchange to the drawee bank on its due date, and the bank will withdraw the amount written in the bill of exchange from the drawer’s account and pay it in cash to the payee, or deposit it in his account.
This can be viewed as the process wherein the drawer refers his creditor to the bank, and since he has money deposited with the bank, and the bank is indebted to him, the transfer of liabilities is valid, and does not require an acceptance (from the bank).
In this case, it is not permissible for the bank to charge a fee for paying its debt.
2. The drawer transfers the liability of the amount mentioned in the bill of exchange to the bank, without having deposited an amount in the bank, or without the bank being indebted to him. This is a case of a transfer of liabilities to a debt-free person, one who is not indebted to the drawer, and is permissible.
The bank in turn accepts the transfer of liabilities and pays the amount. It also charges a fee to the drawer for accepting the transfer of liabilities, and acquiring this fee is permissible.
3. The payee presents the bill of exchange to the bank to claim the amount, without any transfer of liabilities by the drawer. This service can rendered as an instance of a service that is a subject of a ju‘¡lah, and to acquire a fee as a ju‘l (the item given in exchange for the service in a ju‘¡lah agreement) is permissible, given that the bank intervenes in acquiring the actual debt only. However, if it also determines a profit and a proportional interest for the debt, its intervention is not permissible.

2864. It is permissible to buy and sell foreign currencies, such as dollars and euros, for an amount that is more, less or equivalent to the amount for which it is purchased. It also makes no difference if the transaction is paid for immediately or at a later date.

2865. If a person has a chequing account with a bank, and has deposited an amount in that account, he reserves the right to withdraw any amount that he wishes from the account which does not exceed his balance.
However, sometimes a bank allows a client to withdraw a particular amount, without having a sufficient balance in his account, based on the trust that it has in the client. This is known as an overdraft. The bank in turn takes a profit for loaning that amount. However, such an act of loaning and acquiring of profits is not permissible.

The economic value of a commodity is determined by two factors:
1. The commodity offers a particular benefit, making it coveted by rational people, such as things which are edible, consumable or wearable.
2. A body that is vested with the authority, sets a value for the property, such as currencies and stamps which are valued by the government.

2866. Buying and selling is different from loaning, both in terms of the subject and also the precepts. In terms of the subject, buying and selling is the act of exchanging a corporeal property for another in its attribution, be it an attribution of ownership or proprietorship. Loaning is the act of giving ownership of a corporeal entity to the party that is acquiring the loan, in return for a substitute if the item is fungible, and for its value if it is not fungible.
In terms of their precepts, the following are some areas where they differ:
1. Interest in sales differs from interest in loans. In a loan, any additional amount that is stipulated is interest and forbidden. However, in a sale, it is only forbidden if the item that is sold and the item acquired in return are both of the same type, and they are sold by weight or volume. In this case, any extra amount is interest and it is forbidden. Hence, if they are not of the same type, or they are not sold by weight or volume, it is not forbidden to take an extra amount, such as the case in commodities which are sold by count.
2. If a sale involves interest, it will invalidate the sale, and an exchange of ownership will not be realized. However, in the case of a loan, stipulating interest will not invalidate the loan. The debtor will become the owner of the loaned item. However, the creditor will not become the owner of the stipulated excess.

2867. All paper money, such as Iraqi dinars, American dollars or Iranian tumans, have economic value, because their respective governments have set a value for their paper money, which is accepted and common in all countries. It is for this reason that it has economic value, and they may cancel its economic value and validity at any time.
It is obvious that such money is not sold by weight or volume, and hence some of the jurisprudents (may the Lord raise their status) have said, “It is permissible to exchange this money for more or less of the same kind. It is also permissible to give this money in cash for a debt being owed, for less than it or more than it.”
However, to exchange something that has an arbitrary economic value, and is purchased and sold by count, for something more or less of the same kind is problematic.
In the event that the owner of the greater amount reaches a compromise settlement with the owner of the lesser amount, in that the owner of the greater amount would gift it to him, and he too would gift the lesser amount to him, then it will not be problematic. For example, the owner of nine hundred dollars would state to the owner of a thousand dollars, “I compromise with you that you would gift a thousand dollars to me and in return I would gift nine hundred dollars to you.”

2868. Bills of exchange which are common amongst businessmen and people, and are used to carry out transactions, are not like currency notes which have an arbitrary economic value; rather, they are certificates of a loan that is liable on the payer and the signatory of the bill. Hence, when a buyer gives a bill of exchange to the seller, he has in fact not paid the price of the purchased commodity. Therefore, if the bill of exchange gets lost or burnt whilst it is in the possession of the seller, nothing will be lost of his property, and neither will the responsibility of the buyer be lifted. However, if he pays for the price of the commodity with paper money, and then the money gets lost, it will be deducted from the property of the seller and he will incur the loss.

2869. Bills of exchange are of two kinds:
1. A bill of exchange which is reflective of a real loan, meaning that the signatory in reality owes the amount mentioned in the bill to the payee, and the bill is a record of that loan.
2. A bill that is not reflective of a real loan; rather, it is only imaginary.
In the first kind, wherein the payee is in fact owed a time-specific loan, selling the bill for an amount that is more or less is not problematic, given that there is a difference (in the two), such as dollars for pounds, and given that it is not the price of a credit based transaction. However, if there is no difference, such as selling dollars for dollars, then it is problematic. However, if the transaction is carried out in the form of a compromise settlement as elaborated in article 2867, it will not be problematic.
In the second type, where the bill is imaginary, the payee cannot sell it to another person, since he is not owed anything by the signatory of the bill; rather, the bill of exchange was issued so that the payee would be able to make use of it. The manner of using it according to the shari’a is in the following manner: The payer deputizes the payee to sell the amount mentioned in the bill—such as 50 Saudi riyals which are worth 11,000 Iranian tumans—on his behalf to the bank for another kind of currency for a lesser value, such as 10,000 tumans, and also deputizes him to then sell the 10,000 tumans on the behalf of the payer to himself for the price of 50 Saudi riyals.
In this manner, the payee becomes indebted to the payer in the amount that the payer has become indebted to the bank, which is 50 riyals.
Another manner would be a case where the bank loans the amount of the bill to the payee, and in return the payee pays an amount to the bank as documentation fees, without it being stipulated by the bank. However, if it is stipulated as a condition, even if it be non-explicitly understood, it will be considered an interest-based loan.
There is no problem for the payer to demand the amount of the bill from the payee, and acquire it from him, because the payee has transferred his debt to the bank in its entire amount from the bank to the payer.