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Istisna sukuk are
certificates that carry equal value and are issued with the aim of
mobilizing the funds required for producing products that are owned by the
certificate holders. The issuer of these certificates is the manufacturer
(supplier/seller), the subscribers are the buyers of the intended product,
while the funds realized from subscription are the cost of the product.
The certificate holders own
the product and are entitled to the sale price of the certificates or the
sale price of the product sold on the basis of a parallel Istisna, if any.
Istisna Sukuk are quite useful for financing large infrastructure projects.
The suitability of Istisna for financial intermediation is based on the
permissibility for the contractor in Istisna to enter into a parallel
Istisna contract with a subcontractor. Thus, a financial institution may
undertake the construction of a facility for a deferred price, and sub
contract the actual construction to a specialized firm.
Shariah prohibits the sale of these debt certificates to a third party at
any price other than their face value. Clearly such certificates cannot be
traded in the secondary market.
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