Letters of credit
Question

                One of the practices which is well-known
      in the financial field nowadays is when a businessman wants to import a product, for
      example, he asks the bank for a letter of credit for a certain amount, either in his own
      account or from the bank itself, and the bank takes some form of payment for providing
      this letter of credit. What is the ruling on this?
Praise be to Allah.Lord of the Worlds.
    Firstly: Letters of credit may be of different types, initial or final.
    Either type of letter of credit may or may not be covered by the balance in the
    businessman’s account. If it is not covered, then the the issuer bears joint
    liability with the applicant with regard to current and future obligations. This is
    essentially what is known in Islamic fiqh as damaan (liability) or kafaalah
    (sponsorship or surety).
If the letter of credit is covered, then the relationship between the
    one who is requesting it and the provider (the bank) is that of an agency. Acting as an
    agent is valid whether or not a fee is paid, so long as the agent relationship serves the
    interest of the one for whom it is done (in this case the third party from whom the good
    are being purchased). 
Kafaalah (sponsorship) is a voluntary agreement whose purpose is
    goodwill. The fuqaha’ have stated that it is not permissible to accept a fee in
    return for it, because in that case when the sponsor (kafeel) receives a sum of money when
    the credit is paid, it becomes like a loan which brought some benefit to the lender, which
    is not allowed in Islam [because it is like riba or interest – Translator].
On this basis, the following is clear:
Firstly: that it is not permissible to charge a fee for issuing a
    letter of credit – which usually takes into account the amount of money and length of
    time involved – whether the credit is covered or not.
Secondly: charging administration fees for preparing either type of
    letter of credit is permissible, so long as the amount charged does not exceed what is
    usual, whether the letter of credit is wholly or partly covered. In evaluating the
    administration fee for issuing a letter of credit, it should be taken into account what is
    actually involved in doing so. And Allaah knows best.