In this case, the financier is responsible for the construction of the house in full compliance with the specifications listed in the agreement. In the event of a dispute, the Financier will make the necessary changes at his own expense to bring it into conformity with the terms of the Contract. There are three sets of documentation in istisna`: Modern BOT agreements (Buy, Operate and Transfer) can also be formalized on the basis of istisna. If a government wants to build a highway, it can enter into an istisna contract with a builder. The price of istisna in this case may be the right of the builder to operate the motorway and charge tolls for a certain period of time. Parallelization includes: the customer (the buyer); the Islamic bank (the seller); and the manufacturer (in some cases it can also be a subcontractor), where the buyer can get financing from the Islamic bank The following diagram shows the parallel structure of istisna: The above structure is also called “istisna simple”, assuming that the buyer has the necessary financing to coordinate directly with the manufacturer about the project. If the buyer does not have the financing, the parallel istisna structure below can be used. Infrastructure projects are the main examples of the application of istisna. These include: the construction of power plants, factories, roads, schools, hospitals, buildings and housing estates. The parties to an Istisna contract are: the manufacturer or manufacturer; the bank (i.e.
the financier); and the customer (i.e. the buyer of goods). In practice, Istisna contracts can be concluded with other Shariah-compliant agreements, including: kafalah, takaful; Rahn; Hamish Gedyyah (deposit) or Arbun (deposit). Istisna` means asking someone to design, build or manufacture an asset. In Islamic finance, istisna` is usually a long-term contract in which a party commits to produce, build or build assets, with the obligation of the manufacturer or producer to deliver them to the customer once completed. In practice, the main advantage of an istisna contract is that it can offer flexibility to the customer, as payments can be made in installments related to the completion of the project, delivery or after the completion of the project. Unlike istisna`, with salam contract payment must be made in full in advance. The Islamic Banking and Finance Manual is a unique textbook on the subject that allows readers to test their understanding of Islamic banking and financial concepts. Although it is suitable as a self-directed learning tool, the book is designed to test the information covered in the accompanying book Introduction to Islamic Finance and Banking and covers the basics of Sharia law, interpretations and definitions of Islamic treaties, Murabaha, Mudaraba, Musharaka, Istisna`a, Salam and Ijara Modi of finance, Takaful and much more.
The focus is on mini-case studies, multiple choice questions and tests of basic concepts. It also includes a comprehensive answer and short chapter summaries, as well as learning objectives. The Istisna instrument can also be used for project financing in the same way. If a customer wishes to install an air conditioning system in his factory and the system must be manufactured, the financier can undertake to prepare the system by istisna contract according to the above procedure. Similarly, the istisna contract can be used for the construction of a bridge or highway. For the Istisna` to be valid, the price must be fixed from the beginning. In the event of an unforeseen event resulting in a delay in delivery, the price of istisna may be changed if mutually agreed. Once the manufacturer has started working, the contract cannot be terminated unilaterally. The Islamic foundation of istisna` can be found with the following two hadiths: Istisna can be used to provide the possibility of financing in certain transactions, especially in the field of real estate financing.
If the client has his own land and is looking for financing for the construction of a house, the financier can commit to building the house on this open plot on the basis of istisna, and if the client does not have land and also wants to buy the land, the financier can commit to providing him with a house built on a certain plot. On the other hand, it is not necessary for the financier to build the house himself. He can conclude a parallel contract of istisna with a third party or use the services of a contractor (with the exception of the customer). In both cases, he can calculate his costs and set the price of istisna with his client in a way that can bring him a reasonable profit on his costs. .