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What is Al-Kafalah

Islamic banks use Al Kafalah to issue Bank and Shipping guarantees. Al Kafalah is a contract made between the Bank and another party whereby the Bank agrees to discharge the liability of a third party in the case of default by the third party. As a surety, the third party will give the bank some form of collateral and pay a small fee for the services.

Under the Kafalah Shipping Guarantee, the Bank gives a surety to the owner of the shipping vessel, to discharge goods to the importer pending receipt of the original bill of lading.

Under the Kafalah Bank Guarantee, the bank guarantees the company's standing to facilitate any business endeavours that may require such guarantees.