Al-istisna’ practice in Malaysia is an evolved in a form of facility that is practical and ideal financing and meet customer requirement. It is in accordance with the principles applied in Islamic transaction. In addition, it much helps to the development of the national economy. There are a lot of housing constructions and infrastructure uses these facilities. In Islamic banking system, specifically in our country, namely Bank Islam Malaysia Berhad (BIMB) has provided a modern facility financing mechanisms which applied and practiced the principles of contracts through the sale and purchase contract of al-istisnac.
Facilities that offer the facility is known as Istisnac Facility ISTISNAC FACILITY Istisnac Facility is a facility purchase order or reservation by the buyer or the booker of a product. It is a product offered by BIMB to its customers who originally want to make loans. However, as we are well aware that in Islamic law, principles which can be used for services only contract loans Qard Al-Hasan. As a result of discussions and studies made by the Syariah Advisory Council and the individuals who are qualified in the field of economic and religious, then the bank agreed to issue a facility to their customers namely Istisnac Facility.
The basic concept of Istisnac Facility is that the bank will purchase ownership of an asset that is in the process of construction of the customer in accordance with the construction contract between the customer and the supplier or contractor, and the next title to the asset is sold back to the customer, the sales price which includes the purchase price and profit margins. Customers will pay the selling price by installments according to an agreed period. In daily practice, BIMB has adapted the bridging scheme (Bridging Loans) issued by conventional banks and also contract of al-istisnac.
Both were used as a method of banking financing for Istisnac facility. It is more in a form of interim financing. Istisnac facility (Istisnac Facility) issued by BIMB is to finance certain projects which are recognized and comply with istisnac contract requirements. They are: 1) Funding for housing projects 2) Construction of the building for commercial or industrial purposes 3) Commercial projects such as roads, buildings, etc. 4) Other project. It is worth mentioning here that the Istisnac Facilities offered by BIMB usually combined with contracts and other facilities issued by the bank.
It is not a stand-alone facility with no other contract to support. This combination turns out to give you more advantages and facilities to counterparty banks, customers, and others involved. They argue that when it is made in a separate contract, the cost of the production of the facility will increase. In fact, the production procedure is also more complicated and more time consuming. Therefore, the combination Istisnac Bayc Bithaman Ajil Facility and is considered as an ideal mix of couples, customarily practiced by the bank.
Practically, the two contracts have a continuity which is more effective compared to other instruments. The basic concept of the combination is that, the customers will order for an item, for example, as customers want to buy a house from the developer. He would then find the bank and the bank will issue istisnac facility (Istisnac Facility) in which the bank will buy the goods (home) is (from the developer) and then sell it back to the customer. This process is done by using the booking contract.
Meanwhile, the payment transaction will be done through delay payment (Bayc Bithaman Ajil), by installments or according to agreement reached by the bank and the customer. However, transactions that use these facilities generally accepted by the bank involve many parties. In this facility, the bank will often use bridging finance (bridging financing) as practiced by conventional banks. There are two levels of payment for the sale which is done by the bank. The first stage is a period of 12 months or 24 months for which the funding is for a total payment of profits earned by the banks as a result of the sale to the customer.
The second stage is the stage of acceptance for the total cost of the purchase. Money withdrawal for the purchases made by the bank to the project will be paid according to the stage of completion of the project which has been determined and approved by a panel of architects. However, the bank has the right to choose the higher prices of payment by installments, as was mentioned earlier, or through a redemption price of ownership. Title redemption price is the price determined when a third parties wish to purchase the project.
This process takes place in the end of the financing process. It occurs when there are individuals who want to buy a small house that is being built through common projects undertaken by developers who use bridging finance (bridging financing) on ??a per unit of a-a. Minor individuals will then get a loan from another bank (the third person). The bank, as a security to the loan will redeem the project title of BIMB. There came the redemption price of the property which will be evaluated by the BIMB, either payment by installments or title redemption price of the projects (i. . which of higher profits or both).
COMPARISON AND RELATIONSHIP BETWEEN ISTISNAC LOAN FACILITIES WITH CONNECTOR (bridging loans) Despite the fact that Istisnac contract is a contract found in Islamic Muamalat system, but istisnac facility (Istisnac Facility) offered by BIMB is the result of the modifications made to the conventional loan facility Bridging (Bridging Loans). Referring to the use of bridging finance facility BIMB in istisnac, bankers feel that the financing has similarities and compatibility with istisnac facility.
By this method, the bank will buy from customer, projects to be implemented. The purchase was made through booking concept with prices negotiated by the bank and the customer. Later, the bank will sell back or assets, which is implemented to the customer. The price for sale comprises the price of purchase and the rate of profit to the bank. Payments for redemption will be done through installments, over an agreed period or redeemable balance shall be done if the bank feels it is appropriate.