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RM-2.2.29

For instance, in the case of an Istisna transaction, the Islamic bank licensee enters into an Istisna contract as seller to provide manufactured goods or a building to a customer. The Islamic bank licensee will then enter into another (parallel) Istisna contract as buyer with a supplier (manufacturer or builder), using the specifications drawn up for the original contract. If the supplier fails to deliver the manufactured goods or the building according to the agreed specifications, the Islamic bank licensee would equally be in default of its obligation. If necessary, a separate engineering department might be established or an outside expert should be engaged to evaluate, approve and monitor the technical aspects. Islamic bank licensees may also stipulate that the party to the first contract must inspect the manufactured goods or building from time to time during the production or construction process to satisfy themselves that the specifications are being met.

January 2013