Construction / Manufacturing (Istisna) Finance
Construction/Manufacturing (Istisna) Finance is a contract used for manufacturing, construction or development. Under this arrangement, the bank could be requested to facilitate the construction, manufacturing or development of a project by the customer. The delivered project is then sold to the customer by the Bank at a selling price (cost plus profit margin) on deferred payment terms or as a full sum.
The Bank on its part, may then engage a third party (contractor) to construct, manufacture or develop the project at a price (cost price / facility amount). Upon completion, the contractor either delivers the project to the Bank or the Bank can authorize the contractor to deliver the project directly to customer.
This contract can be used for financing the construction of residential housing, construction of commercial and industrial buildings/project or any other asset that requires some manufacturing/construction to place it in a useful state etc.
Customer’s payment of the Bank’s selling price may be paid in full upon delivery or by way of progressive payment through the life of the project.