Istisna as Mode of Finance
From HodHood
Contents
Top 20 FREQUENT WORDS
contract 30 istisna 28 manufacturer 13 permissible 11 price 10 purchaser 10 ultimate 9 items 8 parallel 8 produced 7 concluded 6 customer 6 delivery 6 islamic 6 payment 6 permitted 6 basis 5 goods 5 institution 5 sale 5 stage 5
DOCUMENT KEY POINTS
- conditions of istisna sale contract specification of type kind quality and quantity of the subject matter to be produced
- istisna as mode of finance istisna is a kind of sale which is transacted before the subject matter is produced
- for example buying certain goods by an islamic bank from the contractor on cash payment basis and selling them to the same contractor at a higher price or where the party ordering the subject matter to be produced is the manufacturer himself or where one third or more of the facility in which the subject matter will be produced belong to the customer
- this means that istisna transaction is different from murabahah in which actual sale purchase is to be executed after execution of murabahah financing agreement
- it is permissible that istisna contract be concluded for the production of subject matter having unique descriptions as well as for the production of subject matter that has perfect substitutes available in the market
- an istisna contract is permitted only for raw materials that can be transformed from their natural state by a manufacturing or construction process involving labor
- it is permitted for the manufacturer to fulfill his obligations in istisna contract by the delivery of items produced by his own resources or items produced by other parties even the items were in existence before the istisna contract was concluded
- the contract of istisna may be concluded with a condition that production shall be carried out by the islamic bank using its own resources and will have a right to assign the process of production to another entity
- the price of istisna contract may be in the form of cash or tangible goods or the usufructs on an asset for a particular duration whether such usufructs are related to an asset other than the subject matter or to the subject matter itself
- it is permissible to draw up an istisna contract for real estate developments on designated land owned either by the ultimate purchase or the contractor manufacturer on land in which either of them own the usufruct
- it is permissible to state in the istisna a contract that the manufacturer will act as the agent of the ultimate purchaser to sell the subject matter if there is a delay on the part of the purchaser in taking delivery of the subject matter within a particular period of time
- it is permissible for the islamic bank when acting as the manufacturer to draw up an independent and separate contract of agency appointing the ultimate purchaser as an agent of the islamic bank to supervise the manufacturing or construction process so as to ensure that the items produced conform to contractual specifications
- it is permissible for the institution acting in the capacity of the producer or supplier to conclude an istisna contract with the aim of selling such items to the customer on a deferred payment basis and to enter into a parallel istisna contract on an immediate basis with a manufacturer or builder to acquire such items as per the specifications in the first contract and sell them to the customer
- this is permissible on the condition that delivery date stipulated in the parallel sale contract must not precede that stipulated in the original purchase contract and moreover the two contracts should remain separate from each other
- therefore it is also not permissible for a party to an ordinary istisna contract a to withdraw his contractual obligation or delay delivering the subject matter of the contract because the price of the goods to be delivered because of an increase in the cost of goods in the parallel istisna
Please note, This is an auto generated summary based on sentances position in the document and other factors
DOCUMENT WORD ANALYSIS
Main Category
- AlHuda Material\islamic banking
KeyWords
contract price sale asset financing lease client purchase ijarah payment profit musharakah lessee amount commodity housing agreement contracts ownership project
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DOCUMENT REFERENCES
Number of Pages
9
Published Date
2016-09-17 00:27:07
