Istisna

Definition

The Arabic word “Istisna” (استصناع) means “asking someone to manufacture”. Istisna is a sale transaction where commodity is transacted before it comes into existence. It is a contract of sale of specified items to be manufactured or constructed, with an obligation on the part of the manufacturer or contractor to deliver them to the Customer upon completion.

Generic Process Flow / Modus Operandi

Step 1: Order to Manufacture by Bank (UBL AMEEN)

Customer and UBL Ameen enters into an Istisna Agreement under which UBL Ameen orders the customer to manufacture a certain Asset (specified items) for UBL Ameen against Flexible payment option (either advance or deferred payment).

Step 2: Delivery of Asset by the Customer

After manufacturing the asset, the asset is delivered to the bank by the customer.

Step 3: Sale of Asset in the market

After taking delivery bank sells the asset into the market either directly or by appointing someone as his agent (or the by making customer as an agent).