Document background
The Line of Credit Agreement is a fundamental banking document used in Saudi Arabia when a financial institution agrees to provide revolving credit facilities to borrowers. This agreement must be structured to comply with both Saudi Arabian banking regulations and Islamic finance principles, making it distinct from conventional credit facilities used in non-Islamic jurisdictions. The document is typically used when businesses require flexible access to funding for working capital, operational expenses, or growth opportunities. It includes comprehensive details about the credit facility, including profit rate structures (instead of interest), drawdown mechanisms, security arrangements, and compliance requirements. The agreement must incorporate specific provisions to ensure Shariah compliance, particularly regarding the prohibition of interest (riba) and the requirement for asset-backed financing structures. It also needs to align with SAMA (Saudi Central Bank) regulations and the Banking Control Law of Saudi Arabia.
