Istisna contract is by definition a contractual agreement within Islamic Finance that allows for the manufacture or construction of goods, properties, or projects to be delivered at a future date, with specific terms and conditions agreed upon by the buyer and seller, facilitating Shariah-compliant manufacturing and construction projects.
Istisna contract is unique as it provides flexibility in payment terms, allowing payments to be made in installments or at the time of delivery, adapting to the financial capabilities of the buyer and the production schedule of the seller.
Under Istisna, the price, quality, and specifications of the project or goods to be delivered are clearly defined at the time of the contract, ensuring transparency and mutual satisfaction for both parties involved.
The seller or manufacturer undertakes to produce or construct the goods, bearing the risk until the delivery is made, which aligns with the Islamic principle of bearing risk in trade.
Istisna contracts are widely used in Islamic finance for large-scale projects such as real estate developments, infrastructure projects, and the manufacture of complex items, offering a Shariah-compliant financing solution.
One of the distinguishing features of Istisna is that it allows for modifications to the specifications of the goods during the production process, provided that these changes are mutually agreed upon, offering flexibility not found in other Islamic contracts.
The completion and delivery of the project or goods trigger the fulfillment of the contract, with provisions in place to handle delays or discrepancies in delivery, ensuring that all outcomes are just and equitable.
Istisna contracts play a vital role in the development of Islamic financial markets, providing a mechanism for growth and development that adheres to ethical and religious guidelines, by facilitating the financing of production and construction in a manner that complies with Islamic law, .