Introducing Istisna’ for Financing Personal Housing Projects by Islamic Microfinance Banks in Nigeria

Abstract

Istisna’  is  a  mode  of  financing  housing  projects  and  other manufactured  assets.  It  involves  negotiation  on  the  object  of  sale with the buyer, the producer and the financier, amount and profits to be paid agreed upon before the construction of the item  begins. In  essence  the  business  transaction  has  been  completed  before  the item  of  construction  comes  into  existence.  It  is  also  known  as  a forward  sale.  This  study  looks  into  projects  that  could  be  financed through istisna’ mode of funding. Its focus however is to introduce istisna’  to  Islamic  Microfinance  Banks  in  Nigeria  as  a  financing product  for  the  construction  of  personal  houses  for  individual persons,  and  also  to  other  areas  where  istisna’  could  thrive.  It  has been observed through interactions with the Nigerian practitioners in these banks that they lack any idea of istisna’, the benefits to be derived  from  its  usage  and  principles  guiding  its  mode  of operation.  The  researcher  through  documentary  approach  x-rayed the  socio-economic  benefits  of  using  istisna’  to  finance  personal houses projects and the necessity of incorporating it into one of the microfinance  banks  products  to  be  explored.  The  developmental gains,  practical  economic  empowerment  and  fund  circulation  of banks investment among the people through the use of istisna’ are enormous and needed to be explored and exploited by the Islamic Microfinance  Banks  that  deal  with  people  at  the  micro  level.  This the  researcher  aimed  at  drawing  the  attention  of  the  banks  to  and hence  has  given  practical  illustration,  guidance,  suggestions  and recommendations  on  how  the  Islamic  Microfinance  Banks  could tap  the  benefits  of  istisna’  to  make  more  meaningful  profits  to  the banks  and  also  to  contribute  significantly  to  the  economic  welfare and ownership housing scheme of the people.