slideshow

Istisna’a Contract in Islamic Finance

Posted on 12th August 2012 by Camille Paldi,

 

Dubai Construction

Thoughts from Iraj Toutounchian’s Islamic Money & Banking, Integrating Money in Capital Theory

Istisna ‘a appears in the literature as follows:

At the request of the client, the bank places an order for the manufacture of some equipment or the construction of some major item as road or water pipeline… When the item is ready, the bank buys it from the manufacturer and sells it to the client at whose behest the order was placed, at a profit, on a deferred payment basis.  (Khan 2000: 26-7)

While this is clearly a useful contract and one designed to promote production, it seems to me that it would be more practical and manageable for the bank if it were amended to read that the bank may sign, on the basis of a written request from a client, a civil partnership contract with a contractor for the manufacture of some equipment or the construction of some major items needed by the country.

The item(s) requested by the client should be specified precisely, and the place, delivery, price, and so on have to be predetermined.  Immediately after the completion of the manufacture, the item has to be sold to the client on an installment basis.  This contract is typically a combination of two contracts: a Civil Partnership between the bank and manufacturer (or contractor), and another between the bank and, most likely, a government entity, for security reasons.  The bank is the financier, the client is the final user, and the firm or the contractor is the manufacturer.  There are many instances, especially in developing countries, in which there is a need, the financier is available and the contractor has the qualifications to meet the client’s demand.  The amended version of the contract can help bring three parties together and enable otherwise- impossible projects to come to fruition.  The trilateral agreement paves the way for major projects in which the client lacks the necessary funds.


Posted on 12th August 2012 by Camille Paldi


Comment on this post







Twitter

    • 30th June @camille paldi
    • Kazakhstan introduces changes to obligatory insurance and Islamic finance laws - http://t.co/7Tr7B0SYZj #GoogleAlerts
    • 29th June @camille paldi
    • IFC and Ghanaian companies partner to build extractive industry - http://t.co/9LIf5KaNiY #GoogleAlerts
    • 29th June @camille paldi
    • Oman: Takaful insurance accounts for OMR24m - http://t.co/zFZvO71RLx #GoogleAlerts
    • 26th June @camille paldi
    • Only if you have a lot of time on your hands-International Finance Magazine https://t.co/Tcpok72wWO via @sharethis
    • 25th June @camille paldi
    • Saudi's Riyad Bank prices 4 bln riyal capital-boosting sukukIslamic Finance - Zawya - http://t.co/ZoMzZmWjLE #GoogleAlerts
    • 25th June @camille paldi
    • Will Kuwait Need Shariah Board For Islamic Banks? - http://t.co/EpV3hrVll6 #GoogleAlerts
    • 25th June @camille paldi
    • FAAIF Announces the Dubai International Business and Social Sciences Research Conference http://t.co/6evxTHdcVT via @ein_news
    • 25th June @camille paldi
    • For Luxembourg, €200mn bond was just a start-International Finance Magazine https://t.co/Sgk0fa1uzO via @sharethis
    • 25th June @camille paldi
    • OJK May Ease Foreign Ownership Rules for Islamic Banks - http://t.co/9Ok63gLe59 #GoogleAlerts
    • 25th June @camille paldi
    • Research and Markets: Market Attractiveness and Future Prospects of the UAE Takaful Insurance ... - http://t.co/Nj2uo2A72Y #GoogleAlerts
    • 25th June @camille paldi
    • IFSB issues Microtakaful regulation draft - http://t.co/ssRg2p0dEv #GoogleAlerts
    • 24th June @camille paldi
    • Saudia to acquire 50 new Airbus aircraft through Shari'ah-compliant finance - http://t.co/BiY5MGqURw #GoogleAlerts
    • 23rd June @camille paldi
    • Indonesia rushes to create Islamic megabanks - http://t.co/YrpRjb4qeI #GoogleAlerts
    • 23rd June @camille paldi
    • "Reforming Economics and Finance in the Light of Abrahamic Principles" by @cpaldi on @LinkedIn https://t.co/0qnwQPqJli
    • 23rd June @camille paldi
    • UPDATE 1-UAE telecoms operator Etisalat to allow foreign share ownershipTelecoms http://t.co/jtzqoQLNAD via @zawya
    • 22nd June @camille paldi
    • ICD obtains USD300m syndicated Islamic Murabaha financing - http://t.co/h8ygTmjVJL #GoogleAlerts
    • 22nd June @camille paldi
    • Indonesia regulator may ease foreign ownership rules for Islamic banks - http://t.co/WYwgfsqna6 #GoogleAlerts
    • 22nd June @camille paldi
    • Uganda legalises Islamic banking - http://t.co/nMGkIgnUqT #GoogleAlerts
    • 22nd June @camille paldi
    • Islamic Finance is for all of Mankind, Irrespective of Religion - http://t.co/HJ6iKATnxv #GoogleAlerts
    • 22nd June @camille paldi
    • Government to boost Saudi sukuk issuance - http://t.co/f0eNnN7LDM #GoogleAlerts

Articles

Islam Explains Why Interest is Prohibited in the Bible and Torah

Islam Explains Why Interest is Prohibited in the Bible and Torah

 

By Camille Paldi, CEO of FAAIF, camille@faaif.com

 

 

Lending money is not prohibited in the Bible. What is prohibited is charging abusively high interest. This is because high-interest loans...

Posted on 6th June 2015 by Camille Silla Paldi

The Changing Face of Banking in Dubai

The Changing Face of Banking in Dubai

The Changing Face of Banking in Dubai

Posted on 30th May 2015 by Matthew Pendrey

Islamic Finance is Knocking on the Doorsteps of China

Islamic Finance is Knocking on the Doorsteps of China

 

 

By: Camille Silla Paldi, CEO of FAAIF, camille@faaif.com.

 

China is already an economic powerhouse and the world’s second largest economy full of highl...

Posted on 21st May 2015 by Camille Silla Paldi

FAAIF Participates in World Islamic Funds Conference in Manama, Bahrain

FAAIF Participates in World Islamic Funds Conference in Manama, Bahrain

 

The World Islamic Funds Conference was held in Bahrain on May 18-19, 2015.

 

FAAIF CEO, Camille Paldi, participates in the mega Islamic Funds event at the Gulf Hotel in Manama, Bahrain.  As of 2012, more than 750 Islamic Invest...

Posted on 19th May 2015 by Camille Silla Paldi

Video

Find all our videos here, and also a link to our YouTube video channel so you can view our 'video of the week'

Submit

We would like you to get involved with our site. So if you want to submit Articles, Videos, Events and Call for Papers, please click the button below:

Submit

Valid XHTML 1.1 |  Valid CSS |  Web Design in Durham and Newcastle |  Copyright © 2015

* Prices are converted at USD$0.2723 per AED 1