How does istisna work?

How does istisna work?

Istisna is generally a long-term sales contract between a customer and the bank, whereby Dubai Islamic Bank agrees to construct and deliver an asset at a pre-determined future time, at an agreed price. The bank takes care of paying the contracted developer or builder in full or at specific stages of project completion.

What is Al istisna?

It is defined as “a contract with a manufacturer to make something “or” a contract on a commodity on liability with the provision of work.” A more complete and precise definition by Mustafa Ahmed Zarqa” a contract of selling a manufacturable thing with an undertaking by the seller to present it manufactured from his …

What is the difference between Salam and istisna?

The motivation for bay’ al-salam is the seller’s need for immediate funds to spend for his family sustenance as well as to help him with his production. On the other hand, istisna’ is a commercial contract that results in profits for the manufacturer, while meeting the needs of the commissioner to manufacture.

What is the key advantage of an istisna contract?

The key advantage of an istisna’ contract is that it can provide flexibility to the customer, where payments can be made in instalments linked to project completion, at delivery or after project completion.

Who will use istisna as financing facilities?

Istisna is a type of sale transaction where the buyer places an order with the seller to manufacture certain asset and the sale is completed upon delivery of the asset to the buyer. Istisna is used for providing financing facility for transactions where customer is involved in manufacturing or construction.

What is istisna Sukuk?

Sukuk istisna’ are certificates that carry equal value and are issued with the aim of mobilising the funds required for producing products that are owned by the certificate holders and are quite useful for financing large infrastructure projects.

What is the role of istisna in Islamic commercial banking?

Istisna’ is a sale transaction where a commodity is transacted before it comes into existence. The price in Istisna’ does not necessarily need to be paid in full in advance. It is not even necessary to pay the full price at delivery. It can be deferred to any time according to the agreement of the parties.

Which of the fiqh rules that become exemption to Salam and istisna?

Which of the fiqh rules that become exemption to Salam and Istisna’? The legal capacity of contracting parties. The offer and acceptance. Goods for sale must be in existence.

What is parallel istisna?

parallel istisna’ is where those that commission the asset make progress payments to the financier as the asset is constructed by another contractor or developer. parallel istisna’ allows for any mismatch in the timing or amount of cash flows between those that commission the asset and those that construct it.

How does sukuk work Malaysia?

The Sukuk Issuer with the funds raised from the Sukuk holders will purchase an asset and then lease it back under an Ijarah contract. The rental payments will then be paid back to the Sukuk holders at set intervals.

What are the advantages benefits of sukuk?

Sukuk can play an important part in the development of an Islamic market and banking system. The main advantage of sukuk is to comply with Sharia while boosting the standard of living in Islamic society and developing these societies’ economies.

What is istisna and parallel istisna?