Certificates of equal value (sukuk) that are issued for the purpose of mobilizing funds to be used in the production of goods. Once produced, the istisna’a goods become owned by the sukuk holders. These sukuk are issued by the manufacturer (al-mustasni’) who sells the intended product to the sukuk subscribers. The funds raised from subscription are used to cover the cost of production. Therefore, the product is owned by the sukuk holders who become entitled to the sale price of sukuk or the sale price of the underlying product sold on the basis of a parallel istisna’a if the original contract is offset. In shari’a, it is permissible to trade in sukuk al istisna’a provided that the funds have been used produce the assets owned by sukuk holders. However, if the raised funds are immediately paid to buy a similar product though a parallel istisna’a, then the underlying becomes a type of debt, and trading in debts is not typically permissible by shari’a.
Sukuk al istisna’a are also known as istisna’a sukuk.
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