This study aims to clarify the concept of the letter of guarantee and the letter of credit, to provide a detailed discussion of the Sharīʿah rulings related to both, and to explain that these two terms refer to some of the most important services provided by banks to their clients, particularly in matters related to international trade.
As for the letter of guarantee, it is a document issued by the bank to guarantee a debt, regardless of its type; thus, it is broader in scope than the letter of credit, which is issued by a bank for the benefit of both the seller and the buyer in transactions between countries.
To understand the topic accurately, we must first understand current commercial practices, the need for the letter of credit, its various forms, and the legal nature (takyīf) of the relationships that arise from issuing such a letter. We will then, Allah willing, explain the relevant Sharīʿah rulings, including those related to the letter of guarantee. And with Allah lies all success.
