ISTISNAA is a business contract under which one party requests another to manufacture or construct a work for a fee payable in advance, on a fractional basis or term. This is a variant similar to the MUSAWAMAH contract, except that the object of the transaction is the delivery, not of goods purchased as such, but of finished products which have undergone a transformation process.
Compared to the commercial practices of our time, ISTISNAA identifies itself with the contract of enterprise defined by article 549 of the Algerian Civil Code as follows: «The contract of enterprise is the contract by which one of the parties s’ Oblige to carry out a work or to perform work for remuneration which the other party undertakes to pay to him “.
The ISTISNAA formula, put into practice by an Islamic Bank, may take the form of a triangular operation involving the Bank and the Employer and the Contractor in the framework of a Double ISTISNAA.
Benefits of ISTISNAA Financing
ISTISNAA is a formula that allows the Islamic Bank to assist in the construction, refurbishment, development and finishing of mass works. It also finances the construction of production, transport and consumption equipment to the order of users and / or resellers.
Finally, it offers an alternative solution according to Islam’s precepts to the technique of advances on the market thanks to the double ISTISNAA method described above.
Conditions to Apply ISTISNAA in Business
- The basic principle is that the remuneration of the Bank under ISTISNAA is justified by its intervention as contractor responsible for carrying out the work relating to the construction of the work covered by the contract, either directly or through subcontractors.
- The ISTISNAA contract must involve work to convert a material, a semi-finished product or components into a ready-to-use finished product.
- The contract must specify the nature, the quantity, the quality and the specification of the goods to be manufactured.
Materials, components or semi-finished products must be brought or financed by SANI’I (the contractor).