Proton Malaysia Berhad (Proton) has signed a sales and purchase contract to import engine parts & equipment from a manufacturing company in Tokyo, Japan namely Mitsubishi Auto Engineering (Mitsubishi), for their production line for the assembly of newly launched PROTON X50 SUV which is to be delivered in the second half of current year 2021.

Its primary banker, RHB Islamic Bank (RHB) has been requested to issue a Letter of Credit to Mitsubishi through the latter’s banker Mizuho Bank (Mizuho) in Japan as the Advising/Negotiating Bank.

a) Proton has requested for an Islamic Letter of Credit (LC) and sought your advice on the process if the said LC is to be financed by Islamic Trust Receipt facility upon arrival of the shipment from Tokyo, Japan. Briefly explain to Proton?

b) As an Advising Bank for Mitsubishi (the exporter), Mizuho is less exposed to credit risk and payment risk on the strength of the inward LC issued by RHB. Discuss briefly your supporting views on this statement?

c) Due to the global COVID-19 pandemic, Proton is experiencing a delay in delivery of its shipment from Japan which in turn has also affected its sales significantly. Propose a payment assistance to Proton in settlement of its outstanding trade bills and the justification from Shariah’s perspective?

Answer rating: 100% (QA)

answer 2 A hire purchase agreement is a contract of bailment coupled with an option to hire purchase to acquire the goods delivered to him under such an agreement By the delivery of goods to the hire ... View the full answer