Istisna is generally a long-term sales contract between a customer and the bank, whereby Dubai Islamic Bank agrees to construct and deliver an asset at a pre-determined future time, at an agreed price. The customer then pays the bank either in installments, at delivery or after project completion.
What is Istasna?
Istisna refers to a contract for the acquisition of goods by specification where the price is paid at the time of contract, or paid gradually in accordance with the progress or on completion of a job.
What is mudarabah in Islam?
Many sources state there are two varieties of profit and loss sharing used by Islamic banks – Mudarabah (مضاربة) (“trustee finance” or passive partnership contract) and Musharakah (مشاركة or مشركة) (equity participation contract). …
What is the difference between Salam and Istisna?
Istisna’a is mainly used in the fields of manufacturing (both small scale and large scale), construction, Build, Operate and Transfer (BOT), etc. However, salam is mostly confined to the trading of commodities, particularly those that require from the seller (al-muslam ileihi) no additions or alterations.
What is difference between istisna and Salam?
What is the difference between istisna and Ijarah?
Ijarah is a contract that has a service or usufruct as underlying, and the lessor is neither required nor obliged to provide materials. In istisna’a, the manufacturer or builder provides both services and skills in addition to materials in the form of finished items or buildings.
What are the types of mudarabah?
There are two types of Mudarabah: restrictive and unrestrictive.
What kind of risks are associated with Islamic finance?
Musharakah is a profit-and-loss sharing partnership contract. Islamic financial institutions face various risks such as credit risk, benchmark risk, liquidity risk, operational risk, legal risk, and fiduciary risk. Takaful is commonly referred to as Islamic insurance.
How are Islamic finance products, services and contracts structured?
They are structured as sales and allow for “the transfer of a commodity for another commodity, the transfer of a commodity for money, or the transfer of money for money”. They involve the financing “purchase and hire of goods or assets and services”, and like conventional loans repayment is deferred, increased, and made on a “fixed-return basis”.
What are the investment vehicles in Islamic finance?
The two major investment vehicles in Islamic finance are: Sharia allows investment in company shares. However, the companies must not be involved in the activities prohibited by Islamic laws, such as lending at interest, gambling, production of alcohol or pork. Islamic finance also allows private equity investments.
