In practice, murabaha (cost-plus sale) has numerous applications both on the retail level (business to customer) and the corporate level (business to business). One interesting application of murabaha is the issuing of letters of credit (L/Cs). An Islamic bank may be requested by a customer (usually a merchant) to open an L/C for the purpose of importing goods from abroad. In this case, there are two shari’a stipulations that must be observed by the parties to the contract:

1. The opening of the L/C should not precede the conclusion of the murabaha sale between the customer (the buyer) and the beneficially (the seller) even in case the buyer has taken possession of the underlying commodity.
2. The bank should purchases from the supplier and then sells to the customer on the basis of murabaha to the purchase orderer.

The opening of a letter of credit process is usually carried out through the following steps:

1. The customer requests the bank to open a letter of credit through an application along with a pro-forma invoice and a form with all the necessary details and information.
2. The bank asks the customer to produce a proper guarantee.
3. After receiving the necessary guarantee and checking out the application, the bank opens an L/C for the benefit of the customer and dispatches copies to the correspondent bank in the country of export and to the foreign supplier.
4. The customer issues a promise (wa’ad) to buy the commodity from the bank, and the parties agree on the price of the commodity and the conditions of delivery.
5. The supplier (exporter) makes arrangements to export the commodity and delivers the documents to the correspondent bank in the country of export. The commodity is then shipped and the correspondent bank notifies the bank and sends the documents.
6. After the bank receives the commodity through the acquisition of corresponding documents, it enters into a murabaha contract with the customer and the process completes.