Estensa Contract and Its Application in Banking System with an Emphasis on fund & money Council Instructions on 16th August, 2011

Estisna contract is made between a client and a manufacturer. It is conducted in this way that the client asks the manufacturer for a specific product. After that the manufacturer accepts the order and promises to prepare raw materials, manufacture the product, and deliver it at the due date. The client is also obliged to pay the agreed fee stated in the contract. There is disagreement about the nature and validity of this contract between jurists and legal experts. Some consider Estinsa contract as an independent sale contract, others as forward sale contract. Anyway this contract is considered to be a valid contract in Iranian law. Todays this contract can play a significant role in the Islamic banking system. Using the framework of this contract, banks can finance projects of the public and private sector. They make this contract in two ways: some times as an investor and a representative of the client who demands the product, and sometimes as an intermediate.