Instagram used to allow you to create a custom location, but it has since changed. Custom locations can no longer be created directly on Instagram, rather they must be created through Facebook.

It is unlikely that you will need to create a location on Instagram, as most of the data on the app is taken from Google and Facebook. Most users will not run into this issue if they already have a Facebook business page or a Google My Business page. However, if you need to create a location on Instagram, you must first log onto Facebook to create a location on Facebook and that location will show up on your Instagram account.