Page 16 - ISTISNA_Neat

TYPES OF ISTISNA’
15 CONTRACT
PARALLEL ISTISNA’

CLASSICAL ISTISNA’ o Involves 3 parties and consists of 2 separate contracts

o Involves 2 contracting party, o First contract: between the ultimate purchaser (customer) and the
namely buyer (mustasni) and seller (Islamic bank), where the Islamic bank as seller is responsible

seller (manufacturer/sani) to deliver the asset to customer according to given specifications.

o Mechanism: o Second contract: between the Islamic bank (as buyer) and the

1. The customer (buyer) approaches manufacturer of the asset.
the manufacturer (seller) to o Mechanism:

construct a specified asset for him. 1. The customer wants to purchase the certain assets to be manufactured

They agree on specifications of the and approaches the Islamic bank for financing.
asset, the price and the date of 2. The Islamic bank enters into istisna contract with customer. The price is

delivery at the time of contract determined as bank’s cost plus profit margin.

execution. 3. The Islamic bank enters into the parallel istisna (second istisna)
2. The customer pays the price to contract with the contractor to construct the asset as per the agreed

manufacture in cash or installments specifications with customer.

according to their agreement. 4. The Islamic bank pays the cost of construction to the contractor in the
3. After the completion of second istisna contract.

manufacturing process, the 5. After the completion of manufacturing process, the Islamic bank

manufacturer delivers the delivers the asset to the customer upon the delivery date.

completed asset to customer on 6. The customer pays the price of istisna asset to the Islamic bank in form
delivery date. installments according to their agreement.