What is a documentary credit (letter of credit) and why does it matter for an importer? | Ask Banky

Editor-in-Chief Mohamed Salah

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Editor-in-Chief Mohamed Salah

What is a documentary credit (letter of credit) and why does it matter for an importer?

Asked by Banky team 2 months ago
Banky team Reviewed editorial answer

A documentary credit is an undertaking issued by the importer's (local) bank in favour of the exporter's (foreign) bank, under which the bank guarantees payment of the value of the goods to the foreign supplier as soon as the supplier ships them and presents correct shipping documents that comply with the terms of the credit.

It protects the Egyptian importer from the risk of fraud or of receiving non-conforming goods.

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