Literally it means a sale on mutually agreed profit.
Technically, it is a contract of sale in which the seller declares his cost and profit.
In Islamic law some gain has been prohibited which are generally fixed or if there is no concept of risk shearing.
Conventional Finance believes in return without risk, whilst Islamic Finance prohibits the latter and enforces the opposite.
It is a contractual agreement for manufacturing goods and commodities, allowing cash payment in advance and future delivery or a future payment and future delivery.
Istisna’a can be used for providing the facility of financing the manufacture or construction of houses, plants, projects and building of bridges, roads and highways. Technically, it is a financing technique adopted by Islamic banks that takes the form of Murabaha Muajjal.
Islamic principles simply require that performance of capital should also be considered while rewarding the capital.
On the lending side, Islamic banks issued a number of new lending instruments such as Al Muqarada profit bonds to finance large projects and Al-Mudarabah certificates which were not issued for specified projects.It is a contract in which the bank earns a profit margin on his purchase price and allows the buyer to pay the price of the commodity at a future date in a lump sum or in installments.It has to expressly mention cost of the commodity and the margin of profit is mutually agreed.Islamic banks accept deposits which they can either commit to investment or general deposits.They also have investment accounts with or without authorization.