Istisna'a is a contract between a manufacturer/seller and a buyer under which the manufacturer/seller sells specific product(s) after having manufactured, permissible under Islamic Shariah and Law of the Country after having manufactured at an agreed price payable in advance or by instalments within a fixed period or on/within a fixed future date on the basis of the order placed by the buyer.
- 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. If the product(s) are ready for sale, Istisna'a is not allowed in Shariah. 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.
- It facilitates the manufacturer sometimes to get the price of the goods in advance, which he may use as capital for producing the goods
- It gives the buyer opportunity to pay the price in some future dates or by installments
- It is a binding contract and no party is allowed to cancel the Istisna'a contract after the price is paid and received in full or in part or the manufacturer starts the work
- Istisna'a is specially practiced in Manufacturing and Industrial sectors. However, it can be practiced in agricultural and constructions sectors also