Isnad is an Arabic word which means, approximately, "chain of authority." I have seen the word used when referring to two things: Hadith, and scholars. To understand it better, a bit of background is useful:

In the several decades following the death of the Prophet, many people attributed various sayings to him on numerous subjects. Since these sayings tended to explain religious practice, it was absolutely vital to distiguish between accurate and inaccurate quotations. Sometimes a person would add their own words to those of the the Prophet, sometimes without realizing it, sometimes because they could only remember the meaning of what they were told rather than the word for word quote. Occasionally, a complete fabrication was attributed to him. In order to classify and authenticate various attributed sayings, some of the most knowledgeable scholars collected tens of thousands of sayings from various corners of the Islamic state from other well known scholars and upright Muslims who were known to be of unimpeachable character. They would then trace these sayings such that an account could be traced back to it's source so that the Hadith would read:

(Muslim (note: this is a collection of Hadith) says:) Zuhayr ibn Harb and Shuja` ibn Makhlad narrated to me from `Ulayyah that he said: Zuhayr said: narrated to us Isma`il ibn Ibrahim, from Abu Hayyan, from Yazid ibn Hayyan, who said: "I, Husayn ibn Sabrah and `Umar ibn Muslim went to see Zayd ibn Arqam. When we sat down with him, Husayn said to him, 'O Zayd, you have been greatly fortunate. You have seen the Messenger of Allah, upon whom be Allah's peace and benedictions, heard his speech, fought with him in battles and have prayed behind him. Indeed, O Zayd, you have been enormously fortunate. Narrate to us what you have heard from the Messenger of Allah , may Allah's peace and benedictions be upon him.'
The quote from Zayd would then follow, Zayd being a known Companion of the Prophet, his word is considered good. The requirements for are, according to Imam Shafi:
"Each reporter should be trustworthy in his religion; he should be known to be truthful in his narrating, to understand what he narrates, to know how a different expression can alter the meaning, and report the wording of the hadîth verbatim, not only its meaning. This is because if he does not know how a different expression can change the whole meaning, he will not know if he has changed what is lawful into what is prohibited. Hence, if he reports the hadîth according to its wording, no change of meaning will be found at all. Moreover, he should be a good memoriser if he happens to report from his memory, or a good preserver of his writings if he happens to report from them. He should agree with the narrations of the huffaz (leading authorities in hadîth), if he reports something which they do also. He should not be a Mudallis, who narrates from someone he met something he did not hear, nor should he report from the Prophet (may Allah bless him and grant him peace) contrary to what reliable sources have reported from him. In addition, the one who is above him (in the isnad) should be of the same quality, {and so on,} until the hadîth goes back uninterrupted to the Prophet (may Allah bless him and grant him peace) or any authority below him."
Regarding scholars, isnad refers to the chain of teachers from a current scholar, to his teacher, to his teacher and so on until one reaches the Prophet or an authority below him. See shaykh for details.

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