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Islamic Finance




Istisna’a Applications


Istisna’a (الاستصناع) is a special kind of the contract of sale (ba’i) in which the underlying commodity is sold before it is available with the seller or before it becomes in his possession. This contract is typically established between a seller (manufacturer), known as al-sani’, and a buyer (manufacture orderer), called al-mustasni’. The former undertakes to manufacture or otherwise acquire the subject matter of the contract (the asset/ item to be manufactured), known as al-masno’o, and sell to the latter, according to preset specifications, and for an agreed-upon price.

The key applications of istisna’a include:

  • Project financing (e.g. infrastructure projects such as roads, schools, hospitals, buildings, power and water facilities, etc).
  • Build, Operate, and Transfer (BOT) financing.
  • Construction financing (ships, aircrafts, vehicles, etc).


Tutorials
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