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1. Introduction and background of the research
The Islamic financial industry has recorded a significant growth since its conception and early stages. According to the Islamic Financial Services Board’s report, the industry’s assets in 2018 reached US$2.19tn, increasing from US$2tn in 2017 (Islamic Financial Services Board, 2018). The robust growth can be mainly attributed to the three sectors of Islamic finance industry: Islamic banking, Islamic insurance (takaful) and Islamic capital market; with Islamic banking experiencing the fastest growth because of its vast range of products targeting the public at large.
One of such Islamic banking products that garnered considerable public acceptance is home financing. In Malaysia, there are several Islamic home financing ranging from sale-, lease- and equity-based products. Among the noteworthy products is equity-based home financing that uses mushārakah or shirkah as the principle of its structure. More specifically, it applies a new contract, known as mushārakah mutanāqiṣah (MM), which specifies the bank (financier) and the customer to be co-owners of the financed asset. In Shari’ah, the nature of mushārakah requires both co-owners in the MM agreement to assume rights and liabilities, in proportion to their capital contribution.
However, there has been doubts raised by jurists, in regard to the title registration of the underlying asset (house) in MM, which leads to other debatable issues, such as the party’s responsibilities regarding maintenance and insurance charges. This study finds that these issues are associated with the core issue of ownership of the underlying asset. In theory, the MM agreement for home financing creates a joint ownership of the asset, which is based on the shirkat al-milk concept [1]. Currently, there are two methods to the registration of a property: the customer as a registered owner or the bank as a registered owner. The latter specifies the customer as the beneficial owner, whereas the former identifies the bank as the beneficial owner. This triggers the debate of the true meaning of ownership and beneficial ownership from the Shari’ah perspective. The compliance of the concept of beneficial ownership with the requirements of the Shariah should also be given proper consideration.
Hence, this study analyzes the concept of beneficial ownership as currently practiced in mushārakah home financing, by using the method of juristic interpretation. Currently,...