 In this module, we shall be studying the structure of Sukuk istisna. You will see that things are getting complicated. We started this course with a very generic kind of module which was general in terms of contents and general in terms of my approach and presentation. Since then, we have learned a lot of things about Islamic banking and finance and we have beefed up our knowledge on Islamic modes of financing and their applications in Islamic banking and finance. So, the things are not as simple as they used to be. Now, we are entering into a phase where we would be learning some serious stuff. Sukuk istisna is based on the contract of istisna. Istisna comes from a root word of staud noonain sanaa. This is why the word urdu comes from sanat. Istisna means to make something, to demand something. Sukuk istisna always is about some construction activity. It's about some manufacturing and similar kind of activities. And of course, it has been quite popular in the context of property finance as well. While the most popular Sukuk structure is Sukuk izhara. Sukuk izhara is popular because it is relatively easier to structure it. It requires an asset that asset is sold to an SPV. SPV then leases it back to the obligor. And this structure gives rise to receiving financing and giving return to the investor. Sukuk istisna on the other hand side is also important, but in the context of large transactions where some construction activity, some manufacturing activity and similar kind of activities are involved. There are not very many examples of Sukuk istisna in the market. However, this is an available option and it has been used on previous occasions by a number of obligor. It must be emphasized that Sukuk istisna and other uses of istisna in property finance are always structured around the forward lease. Al izhara mausufa fiddimma. So forward lease is required to generate frequent returns to the investor. Whenever they invest some money in an instrument, in a bond, in a Sukuk or any other instrument, the expectation is that that investment should start generating some return. If we use istisna in its plain form, then the possibility of receiving returns before the asset has been constructed is not there. So to generate returns, forward lease structure is built in the structure of Sukuk istisna. In certain cases, the Sukuk holders or investors may not require periodic payments, periodic returns. In that case, the structure can be simplified by way of excluding the forward lease agreement from it. i.e. al izhara mausufa fiddimma will not be required. But overall, when we look at the structure and we are going to see it now, it looks like a monster. This is a very complicated structure. But unfortunately, this is how the things are. Let me explain this structure bit by bit so that you understand it properly. This is basically the transaction flow, how the transaction takes place. Step number one is that the Sukuk is issued. The issuer is in this case, this SPV. This SPV issues Sukuk and these Sukuk are bought by the investor. It is interesting that in this case, we are starting with Sukuk issuant. If you remember, I said that for a Sukuk to be issued, there must be an asset preferably in existence beforehand. In this case, there is no reference to the asset at the time of issuing the Sukuk. In fact, there is reference to the asset, but that asset doesn't exist at that time. So, the certificates of Sukuk, they are sold to the investors and investors, of course, they pay money. So, that investment comes into the SPV to the issuer. So, that is number two. Now, on the back of this thing, once the Sukuk have been issued, the SPV would then enter into Istisna, forward lease and service agency agreements with the obligor. This obligor, remember, is looking for money. So, issuer would enter into a number of contracts with the obligor, Istisna agreement that would govern the construction of the asset. And pursuant to this Istisna agreement, the issuer would be paying installments of money to the obligor, which wanted to have financing anyway. Forward lease contract would allow the issuer the SPV to receive forward rentals from the obligor so that it pays frequent returns to the investors in the Sukuk structure. Now, once the property or whatever is being constructed, that is actually constructed, then what happens? But I have explained this Istisna agreement is number three. Then of course, sale price in installments, i.e., the installments, they go from issuer to the obligor, rental payments and periodic distribution of return to the investors. Then we have the phase of delivery of asset. The obligor has completed the construction, completed the manufacturing and that asset is then delivered to the issuer. The issuer of course, would like to sell it in the market or would sell it to a subsidiary of obligor and would get the price. That price would then be used to pay back the money to the investors i.e., the invested money which the Sukuk holders invested in this structure. So, this is how a Sukuk Istisna would look like. This is a generic example of Sukuk Istisna and it is already quite complicated. If you Google, you will find a lot of Sukuk Istisna structures which look even more complicated.