istisna-a

THE STRUCTURE

Istisna'a: Bank contracts to have a specific asset MANUFACTURED or CONSTRUCTED and then delivers it to the customer. The asset need not exist at contract date. Unlike salam: payment may be deferred or in stages (not required upfront).

Shariah requirements:

1. The asset must be described with sufficient specificity to prevent gharar (uncertainty).
2. The contractor (manufacturer/builder) agrees to produce the described asset.
3. Delivery terms (time, place, condition) must be agreed.

PARALLEL ISTISNA'A

Parallel istisna'a: The bank enters CUSTOMER ISTISNA'A (bank is contractor, sells to customer) and a separate BACK-TO-BACK ISTISNA'A (bank is buyer, construction company is contractor).

The bank is in the middle as intermediary. The two contracts must be INDEPENDENT (bank bears construction risk in both).