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OSAS-IST™ · Shariah Advisory Standard

Istisnāʿ Approval Framework

A sale contract on an asset to be manufactured or constructed to defined specifications, at an agreed price, delivered on agreed milestones. Frequently paired with a Parallel Istisnāʿ between the institution and the actual manufacturer.

OSAS-IST™ · اِسْتِصْنَاع
Advisory Dossier

OSAS-IST™ — Approval Memorandum Template

Section 1 — Project & Parties

Manufacturer
—
Purchaser
—
Specifications
Quantity / quality / standards

Section 2 — Delivery & Pricing

Total Price
Currency & amount
Milestones
Schedule & payment trigger
Delivery Date
DD / MM / YYYY

Section 3 — Parallel Istisnāʿ Controls

Parallel Contract Reference
Independent contract ID
Shariah Adviser
Full name & registration
Decision
Approved / Conditional / Rejected
Compliance Checklist

Essential vs Prohibited Elements

Essential Conditions (must hold)

  • Subject matter clearly specified — quantity, quality, materials, performance
  • Price fixed at contract execution
  • Delivery milestones documented; payment may be staged
  • Manufacturer bears manufacturing risk until delivery and acceptance
  • Parallel Istisnāʿ must be a separate, independent contract from the primary one

Prohibited Elements (must absent)

  • Open-ended price or scope (gharar)
  • Linking the two parallel contracts such that one is contingent on the other (in form)
  • Payment of charges/penalties to institution income on late delivery (must go to charity)
  • Sale before construction has commenced where the specification is uncertain
Transaction Layout

Step-by-Step Flow

OFIS-IST™ · Transaction Flowاِسْتِصْنَاع · MANUFACTURE-TO-ORDER CONTRACT1Specification & Prici…
Detailed specifications, milestones and total price agreed with purchaser.
2Primary Istisnāʿ
Institution contracts with purchaser as ṣāniʿ; commits to deliver on milestones.
3Parallel Istisnāʿ
Institution contracts independently with actual manufacturer as mustaṣniʿ.
4Manufacture & Inspect…
Progress monitored; milestone certification by independent engineer.
5Delivery & Acceptance
Asset delivered; purchaser inspects and accepts.
6Settlement
Final payment per agreed schedule; defects-liability period observed.
REVIEWED UNDER OFIS-IST™ · AAOIFI SHARIAH STANDARD NO. 11 — ISTISNĀʿ AND PARALLEL ISTISNĀʿ
  1. 1

    Specification & Pricing

    Detailed specifications, milestones and total price agreed with purchaser.

  2. 2

    Primary Istisnāʿ

    Institution contracts with purchaser as ṣāniʿ; commits to deliver on milestones.

  3. 3

    Parallel Istisnāʿ

    Institution contracts independently with actual manufacturer as mustaṣniʿ.

  4. 4

    Manufacture & Inspection

    Progress monitored; milestone certification by independent engineer.

  5. 5

    Delivery & Acceptance

    Asset delivered; purchaser inspects and accepts.

  6. 6

    Settlement

    Final payment per agreed schedule; defects-liability period observed.

Documentation Required

Standard Document Set

Primary Istisnāʿ Contract
Parallel Istisnāʿ Contract (independent)
Technical Specifications & Milestone Schedule
Independent Engineer Certification Protocol
Performance Bond / Takāful arrangement
Shariah Adviser Approval Memorandum
Shariah Opinion

The proposed Istisnāʿ structure is reviewed and found compliant with applicable Shariah principles subject to the conditions stated herein.

Approved
Conditional Approval
Rejected

Reviewed under OSAS-IST™ · AAOIFI Shariah Standard No. 11 — Istisnāʿ and Parallel Istisnāʿ
Reviewed and Approved by Abdul-Azeez Onike Morufu — Registered Shariah Adviser, Securities Commission Malaysia

Related Structuring Framework
OFIS-IST™ — Istisnāʿ
Open OFIS framework
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OSAS-WAK™

Advisory Subset of OFIS™

OSAS™ · Onike Shariah Advisory Standards

Reviewed and Approved by Abdul-Azeez Onike Morufu — Registered Shariah Adviser, Securities Commission Malaysia

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