Istisna’a is a means of progressive financing. It is a manufacturing (or construction) contract under which the participant (seller) agrees to provide to the buyer, within a certain time limit and at an agreed price, specified goods after their manufacturing (construction) in accordance with the specifications.
This Technique of financing is very suitable for financing infrastructures, construction of industrial and residential buildings, construction and factory equipment or industrial plants. Indeed, the seller commits to provide real property within a specified time limit and at a previously agreed price according to the conditions expressed during preparation of specifications. In return, the buyer commits to pay the seller according to the progress of the work.
The parties affected by an Istisna’a contract are: the contractor (Moustasni’i) and the company that will perform the operation (Sani’i) and the financial institution. The latter assumes the responsible for proper execution of the operation. The remuneration of the bank is linked to its service and responsibilities which is incumbent upon it as such. Payment of the price of the structure constructed may be made in advance or at the end of the operation during delivery of the good, or even by fraction as one goes along progress of the operation.