The Shariah Advisory Council of Bank Negara Malaysia (the SAC) 156th Meeting

The Shariah Advisory Council of Bank Negara Malaysia (SAC) held its 156th meeting on 24 February 2015. The meeting discussed among others issues arising from the draft Shariah Standard on Istisna`.

Ownership
The SAC decided that an istisna` asset which is yet to be delivered to the purchaser (mustasni`) isowned by the seller (sani`). The transfer of ownership of the istisna` asset to the purchaser will take effectonce the purchaser took possession of the istisna` asset through the release of the asset (takhliyah) by the seller to the purchaser. It can be carried out through any mechanism permitted by Shariah, including customary business practice that will allow the purchaser to have access to the asset (tamkin) and to have assumed its ownership risk.

Guarantee
The SAC decided that under the arrangement of parallel istisna`, the purchaser may provide a guarantee to the seller on the performance of a third party such as a developer or manufacturer through a kafalah contract, provided that the guarantee arrangement is independent from his role as the purchaser, to the effect that the validity of the kafalah contract is not made contingent to the istisna` contract or vice versa.

Binding
The SAC decided that an istisna` contract shall not be unilaterally terminated by any of the contracting parties. In the event that any of the parties opted to discontinue the istisna` contract, he is required to compensate the other contracting party based on the agreed terms and conditions in the istisna’ contract.

This document belongs to Bank Negara Malaysia (BNM). Full access to the original source is available here: https://www.bnm.gov.my/banking-islamic-banking