Letters of Credit

Letter of Credit is a definite written undertaking by the Issuing Bank to honor a complying presentation of shipping documents by the Supplier/Exporter/Beneficiary to the Letter of Credit Terms and Conditions. The Letter of Credit is issued on the instructions of the Buyer/Importer/Applicant and by its nature is irrevocable. This means that the Letter of Credit can neither be canceled nor amended without the agreement of the Issuing Bank, the Confirming Bank, if any, the Beneficiary, and certainly on the instructions of the Importer. Therefore, AJIB provides  services for both parties through Letters of Credits whether they are on the Export side or Import side of the transaction. 

AJIB letters of credit are subject to the Uniform Customs and Practice for Documentary Credits, 2007 Revision, International Chamber of Commerce publication No.600 or International Standby Practices ISP98, which are considered a means of settlement in international trade and adopted by all banks worldwide.

Through an outward letter of credit, payment is made on behalf of our clients in return for shipping documents which represent the goods shipped and/or services provided. Our clients are assured that they will only be debited with the value of the shipment or the services, provided that the Exporter\Beneficiary complies with the Letter of Credit Terms and Conditions.

The Importer is able to conserve capital as they do not have to pay cash in advance and will have the ability to do business abroad and negotiate better prices.

Through an inward letter of credit, our exporting client (Beneficiary) can look to the Issuing Bank for payment instead of relying on the ability/willingness of the buyer. In other words, the financial standing of the buyer is replaced by that of the issuing bank which undertakes the process and standing of payment.

In order to ensure safe and effective trade for our clients, once the letter of credit is confirmed, AJIB will add its credit standing to that of the issuing bank and thus it becomes AJIB’s commitment to pay the client if the payment is not obtained from the issuing bank - provided that the requested shipping documents are presented in full compliance with the LC’s terms and conditions.

A StandBy Letter of Credit acts as a guarantee in the case that there is a contractual failure, either that of a buyer to pay or that of a seller to deliver. It has the same form as a commercial documentary credit. However, the intention is often that a beneficiary, in whose favor a standby letter of credit is issued, draws only in case of default on the transaction to which the StandBy Letter of Credit relates.