Istisna
Also known as: Istisnaa, استصناع, Bai al-Istisna, Manufacturing Contract, Islamic Project Finance
Istisna (Arabic: استصناع, literally 'to ask someone to manufacture') is an Islamic manufacturing or construction contract where a buyer commissions a manufacturer to produce a specific asset. Unlike Salam, the price need not be paid in full upfront — it can be paid in instalments during construction, upon delivery, or deferred. The asset must be precisely specified (type, quality, quantity, dimensions). Istisna is the primary Shariah-compliant mechanism for infrastructure project finance, real estate development, and large-scale manufacturing. Parallel Istisna is used by Islamic banks in project finance: the bank contracts with the customer as buyer (Istisna 1) and simultaneously contracts with the contractor as seller (Parallel Istisna 2). Governed by AAOIFI Shariah Standard No. 11. Widely used in Malaysia, UAE, and Saudi Arabia for sukuk-funded infrastructure projects.
Labels
- glossary
- islamic-finance
- contract-type
- manufacturing-contract
- project-finance