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INTRODUCTION

Islamic finance as a whole is one of the more quickly growing sectors in the global financial system. This growth continued after the modern world economic downturn, with Sharia-accordingly capital reaching $ 1.3 trillion in world records in late 2011. With an annual increase of 25-30, Islamic finance halted up to 1% of the global financial market.

The combination in the Islamic financial industry is used for the international financial system which is the international payment system controlled by the DC system except UCP 600, other features include: -ISP98 in IIBLP -LC issued in Art. The UCP 600 has been approved and recognized around the world including IFIs. The AAOIFI Accounting and Auditing Association of Islamic Financial Institutions (AAOIFI, 2010a, b, pp. 195-211) was the DC Sharia standard in 2003. However, AAOIFI remains to exist and reckonable, given its moral structure and the need to expand Western business. So, How do define the existing legal framework for Uniform and Customs Training (UCP 600) to allow the DC system to comply with the Shariīah of financing Islamic international trade?

INTERNATIONAL ISLAMIC TRADE FINANCE

The development of international trade by Muslims has been around for a long time and started 14 centuries ago. And it was old, and now it is nothing new. In the first era of Islam, our Prophet Muhammad (S.W.C) issued an economic order which eventually became the basis of the current Islamic financial business (EFE). in the second half of the twentieth century, there was a gradual progression of Shari’ah production in compliance with the reintroduction revived the Islamic financial system.

Trade finance is a specialized financial sector that deals with short-term transactions of imports and export. In an interest-based environment, a business transaction is financed privately by a loan, even depending on whether or not a transaction is opened. On the other hand, the Islamic economy, as usury is forbidden, trade the operation can be funded using profit and loss techniques. • Basically, business finance consists of four components: – Facilitation of payment: Enabling and facilitating disbursement worldwide. – Financing: a variety of opportunities for financing across the lifespan of a transaction – Risk mitigation: Business financing tools and services are used to manage risk – Providing information on the status of payment for shipments. It is a fact that millions of different businesses around the world have benefited from Islamic products such as Murabaha, mudarabah, musharakah, wakalah, kafalah and etc.

The role of the International Islamic Trade Finance Corporation

Modern IITC is actively involved in financing the global Islamic business and Bank 2011: Nearly all of the top 345 IFIs take over the DC system. IDB founded International Trade Finance Corporation (ITFC) in May 2006. ITFC uses the DC system, maximum UCP 600. The main objective of this company is to develop and advance the part states of the Organization of Islamic Cooperation, by contributing to the facilitation of international trade

. Financing Facilities for International Islamic

Islamic trade finance has taken advantage of the preference of transferring banks to Islamic law. The Islamic business economy is also one of the leading and aims to help and serve more than double USD2 tln Islamic finance.

Most Islamic banks can operate on a variety of facilities and leadership by adopting Sharia’s international trade financing. That is, they must be investigated, and the income of many Islamic financial industries (Muhammed m.Anderson A, 2008). According to conventional documents, the Islamic structure contains an unlimited network of contracts mediated in a way that still protects their individuals. Islamic financial arrangements for the international payment system could not be summarized considering the kind of these products and their possibility to be an effective financial tool for financing international trade.

This effort is necessary given the rapid growth of the Islamic financial system, especially the Islamic financial institutions operating in different countries. So the purpose of international trade is to operate in accordance with the Shari’ah through various investments and contracts: aqd al-bay (sales contract), wakalah, salary, mudarabah, murabahah, kafalah, ujrah (fees), and ta wıd (compensation).

The principles of sharia commonly used in financial instruments of Islamic trade are:-

1. Musharakah: – Under this product, the bank enters into a partnership agreement with the customer to sell and buy goods specified by the customer. The commodity prices are divided by the parties. Profits or losses from the activity are apportioned according to a previously agreed formula and need not be the same as the capital ratio.

2. Murabahah:- The bank imports goods at the customer’s request and sells them to the customer on a murabahah basis. The sale price includes profit margin and repayment requirements are agreed upon on the date of the murabahah deal. The bank uses its own funds to open the letter of credit. Murabahah is the most widely used Islamic trade finance product.

• Wakalah:- Sharia-compliant loans are based on the Wakalah principle, where a bank represents the customer. The bank is paid fees and commissions in place of interest for the services provided.

In international trade financing, FFIIT act as (a) Agents (b) Partners (c) Guarantors of payment (d) Seller/buyer of Goods (e) Charge fees and impose compensation for defaults.

1.2.1 Islamic bank as an agent in the international trade transaction. Comparison of major financial instruments in international trade financing;-

Conventional trade financing: – 1- LC (fee-based). 2- Default of payment on LC (interest-based. 3-Percentage-based fee for LC (fee-based and interest-based). 4- Letter of guarantee (fee-based). 5- Export credit refinancing (interest-based)

Islamic trade financing: – 1- All LC (profit-based. 2- Ta’widh compensation or damages (fixed fee). 3- Ujrah (fee-based). 4- Kafalah LC (not fee-based). 5- Murabahah export credit refinancing (profit based.

Islamic bank as a guarantor of payment in the international trade transaction: – In terms of sponsorship or (kafalah), Islam has a huge potential for international business investment. Since the general rule of Islamic transactions is to provide a guarantee or a loan on time. Sharia law allows for a loan from a lender who can apply for a security advance loan and can apply in the event of a failure to repay the mortgage. According to Islamic Sharia law, a bank is not allowed to collect money or a guarantee commission but may collect such fees for the activities of its entity in the conduct of business transactions including fees related to “data collection, cost analysis- benefits of related projects. , collection and disbursement of appropriate amounts, etc. (Zuḥaylī, 2001). The second related financial instrument is the Rahn (security guarantee) for international business investment. It is legal for an Islamic bank to guarantee customers of international business investment to ensure the payment of LC obligations.

Islamic bank as a seller/buyer of goods in international trade transactions. In the case of the use of international trade financing as a guaranteed amount, the Islamic Bank may decide to sell the goods after a reasonable period of time. However, it is always important for a humanitarian contract to include such a clause in a basic agreement.

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