What is Istisna agreement?
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 customer then pays the bank either in installments, at delivery or after project completion.
What is Istisna example?
Istisna instruments are widely used in the construction industry or for project financing and trade financing. For example, Kuwait Finance House (KFH) uses the istisna contract for home financing (properties under construction) and project financing.
What are the conditions of Istisna any 3?
A contract of Istisna is binding on the contracting parties provided that certain conditions are fulfilled, which include: • Specification of the type, kind, quality and quantity of the subject-matter to be produced. Price of the subject-matter must be known and the delivery date must be determined.
Who provide the raw materials under an istisna contract?
The Islamic Bank as seller (san’e) and the customer as purchaser (mustasne) execute an Istisna contract. After completion of the manufacturing process, the Islamic Bank (san’e) delivers the assets to the customer (mustasne) on agreed upon delivery date.
What is Bai istisna in Islamic banking?
Istisna’a is an exceptional mode of investment allowed by Islamic Shariah in which product(s) can be sold without having the same in existence. Then the sale may be done either in Bai-Murabaha or Bai-Muajjal mode of investment. In this mode, deliveries of goods are deferred and payment of price may also be deferred.
What are the differences between istisna and Ijarah?
Ijarah is a contract that has a service or usufruct as underlying, and the lessor is neither required nor obliged to provide materials. In istisna’a, the manufacturer or builder provides both services and skills in addition to materials in the form of finished items or buildings.
Are Salam and istisna contracts the same highlight the main differences between Salam and istisna contract?
The contracts of salaam and istisna are sale-based contracts between two or more parties that involve the sale of an asset that does not exist at the time the contract is negotiated. Although salaam and istisna contracts are similar to each other, we deal with them separately.
What is Bai Al Salam Islamic finance?
Bai Salam (Arabic بيع سلم, more accurately transliterated as Bai us Salami) is an Islamic contract in which full payment is made in advance for specific goods (often agricultural products) to be delivered at a future date.
What is the difference between istisna and Ijarah?
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.
What is Al Bai Bithaman Ajil?
Exchange Contract Bai’ Bithaman Ajil (BBA) refers to a sale and purchase transaction of an asset to be paid on later date (deferred payment) based on a price, which include a profit margin agreed to by both contracting parties.
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