What was the letter of credit used in the Muslim banking world?

• A. Promissory note
• B. Sakk
• C. Bank draft
• D. Cheque

Answer: (B)

In medieval Muslim commerce, merchants needed a secure, transferable way to pay across distant markets without moving heavy gold or silver. The sakk filled that role, acting as a bill of exchange that functions much like a letter of credit today. A trader would obtain a sakk from a bank or trusted agent, promising payment to the bearer or to an endorsed holder at a specified city or upon presenting certain documents. It could be endorsed and passed along to others, moving credit through networks of merchants and banks. This made cross-border trade safer and more efficient by providing a documented promise of payment that could be discounted or settled later, rather than relying on precious metals. Promissory notes existed, but the sakk’s practical, transferable form—its negotiability across markets—made it the historical parallel to a letter of credit in Islamic banking. Bank drafts and cheques, being more modern or Western developments, don’t capture that same medieval Islamic use.