An evaluation of the suitability of the Istisna contract to financing Essay

An evaluation of the suitability of the Istisna bewilder to financing small enterprises - Essay ExampleThese banks offer work based on religious teachings and laws. The banks continue to provide innovative financial products aimed at filling the active gaps in the financial attention. These banks call for used a philanthropic approach, adopted from Islamic teaching, to offer amply smell services to customers. One of these approaches has been the Istisna contract. Based on the Sunnah of the prophet Muhammad (PBUH) this contract has transformed the banking industry immensely (Mahlknecht, 2009). The use of this contract may be enormously beneficial to people seeking door-to-door funding for small businesses.The contract and its use by Islamic banksThe Istisna contract falls under the family line of manufacturing contracts. It was created by the Islamic Financial Institution in line with the Istisna believes. The contract is strongly related to the shariah. In Arabic, the word I stisna heart making a request to someone to build, construct or compensate something for an opposite. This contract is based on the principle meaning of the word. The contract, therefore, involves harmonys for sale and purchase between two individuals. The items under sermon in the contract agreements of Istisna atomic number 18 non-existent. This can be termed as the greatest difference between the Istisna and other financial contracts within the industry (Warde, 2000). This has led to the identification of the Istisna as a exceptional sale agreement. inside the scope of the Istisna contract, the agreement is normally based on trust between the parties. The asset in the agreement normally has to be constructed or construct in a later date. The parties normally agree on the date in which the finished product should be delivered. The process of creating an Istisna contract needs to be handled with respectable care. The Shariah law dictates that a commodity think for sale must in the hands on the seller when the sale is being make (Mahlknecht, 2009). The seller must also posses the ownership of the product intended for sale. A product to be sold must also have been gained through acceptable means by the Islamic law. The Istisna contract, however, seems to offer a slightly different ideology. In the Istisna contract, the products being sold are normally, not in their final form. The core aspect of the contract becomes the religious values attached to the agreement. whole elements of the contract are based upon trust and belief in the ability of the manufacturing party to deliver items. The quality and quantity of the product is expected to meet the agreed upon standards. In the contract, the parties agree on the specifications of the goods to be manufactured as well as the date of completion of the manufacturing process. The cost price of the items can also be another element agreed upon by the contracting parties. All these elements are done through agre ements made by the contracting parties. Within the scope of the Istisna contract, the Islamic financial institutions are requested by customers to manufacture a product. The product is manufactured by the financial institution on behalf of the customer. Upon completion of the construction, the product is indeed delivered to the customer for payment. Trust becomes essential as the customer may not be able to furnish for the payment of the products delivered. An important note to make here is that the contract terms cannot be changed once they have been agreed upon. This becomes essential in ensuring that each party delivers its part of the bargain. Failure by either party, though, straight off makes the contract obsolete. The