What is the ruling of Islamic law on a bank taking $300 monthly for a bank guarantee worth $10,000, after the client has secured a quarter of the amount for the bank?
An uncovered bank guarantee is considered a contract of suretyship for the uncovered portion between the client and the issuing entity. It is not permissible to take a fee for it, especially if the fee is a continuous monthly amount, as this may lead to a loan that draws benefit, and the contract of guarantee is based on aid and benevolence. The resolution of the Islamic Fiqh Academy has stipulated that it is not permissible to take a fee for a letter of guarantee in exchange for the guaranteeing process, whether it is covered or uncovered. However, administrative expenses for issuing a letter of guarantee are permissible according to , while observing the customary fee.
Summary from Ftawy's records · added here
Reviewed by El Fatwa's sharia committee.
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