ISSN: 2225-8329
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Purpose: Prioritising one Islamic financial contract over others because of cost arguments may benefit Islamic banks (IBs) more than their partners. IBs frequently use murabahah and less for Istishna, even for the construction industries. The study attempts to explore the position of istishna’ aqad in Islamic banks (IBs) and how it relates to the construction industry regarding property prices, specifically in delivering affordable housing to society. Its role is reflected in the three critical issues: banks’ risk, performance, and contribution to property prices. Design/methodology/approach: Using Islamic banks in Indonesia between 2010 and 2023, the study employs a GLS approach to examine the direct and moderating relationship between Istishna and the construction industry. Findings: The findings show that Istishna’ reduces residential property prices and does not impact IBs’ risk and performance. It indicates that Istishna’ plays a long-term orientation for IBs to manage their contract preferences in facilitating public interest. The construction industry moderates the relationship between Istishna’ and residential property price; however, with the contrary direction. Originality/value: Our findings highlight the urgency to rearrange the composition of contract schemes in Islamic banks, mainly recommendations for using Istishna’ aqad in the construction industry. It compares two perspectives on property price determinants, both Islamic bank institutions and public interest orientation, which balance three parties’ interests at once, covering IBs, the construction industry, and the end user.
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