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Istisna'a
Istisna’a is a special
financing facility that could be used for financing construction
projects, industrial equipment and various capital goods. Istisna’a
financing is arranged through a mechanism whereby, KFH contracts with
a purchaser to deliver the contracted items on a future date assuming
responsibility for project completion (Istisna’a), and then appoints
sub-contractors to complete the project under its supervision through
a separate contract (parallel Istisna’a). On completion of the
project, the contracted items are delivered to the original purchaser
who has the responsibility for paying the purchase price as agreed
upon in advance. The mode of payment could be flexible depending on
the advance agreement between the bank and the customer. The Bank’s
return for financing this transaction comprises of a profit margin
included in the selling price, and is usually benchmarked to LIBOR. |
