Asian Social Science; Vol. 11, No. 27; 2015 ISSN 1911-2017 E-ISSN 1911-2025 Published by Canadian Center of Science and Education 155 Beneficial Ownership: To What Extent It Complies with Shari’ah? Nik Abdul Rahim bin Nik Abdul Ghani 1 , Muhammad Yusuf Saleem 2 & Ahcene Lahsasna 2 1 Department of Shari’ah, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor, Malaysia 2 International Centre for Education in Islamic Finance, Jalan Raja Laut, 50100 Kuala Lumpur, Wilayah Persekutuan Kuala Lumpur, Malaysia Correspondence: Nik Abdul Rahim bin Nik Abdul Ghani, Department of Shari’ah, Faculty of Islamic Studies, Universiti Kebangsaan Malaysia, Malaysia. E-mail: nikrahim@ukm.edu.my; narnag79@yahoo.com Received: August 5, 2015 Accepted: October 24, 2015 Online Published: November 20, 2015 doi:10.5539/ass.v11n27p155 URL: http://dx.doi.org/10.5539/ass.v11n27p155 Abstract This paper is a preliminary research on studying the application of beneficial ownership in Islamic financial products. It aims at investigating the meaning of beneficial ownership and its recognition in the Shari’ah perspective. This paper starts with identifying the meaning of milkiyyah (ownership) and its characteristics in the Islamic law and followed by the discussion on beneficial ownership from legal perspective. The study emphasizes on the historical and theoretical aspects of beneficial ownership. It then critically elucidates the meaning of beneficial ownership and its use in commercial transaction as to ascertain whether its use is in compliance with the requirements of ownership in Shari’ah. Analysis is done via the method of takyif fiqhi (fiqh characterisation) on the use of beneficial ownership. Some Shari’ah issues would be examined carefully by comparing the views of classical jurists and then supported by modern jurists. Finally, the study suggests that the beneficial ownership should be considered as real ownership since it is exclusively used in registration and legal documentation because Shari’ah has allowed the transfer of ownership based on a sole basis of contract. Keywords: beneficial ownership, milkiyyah, Islamic finance, contract, law 1. Introduction The Islamic finance market has witnessed tremendous growth during the last few years. It is believed that Shari’ah-compliant assets worldwide reached approximately $1.4 trillion at the end of 2011 and are likely to continue growing in the coming years (Standard and Poor’s Ratings Services, 2012). This immense growth in recent years has been driven by the needs of individuals, governments and corporations for better alternatives to conventional finance. The government of Malaysia has vigorously promoted the growth of Islamic finance for its local markets (Ariff & Rosly, 2011; Balala, 2011). However, the process requires effort and attention when structuring financial products and services. The techniques and processes employed to develop these products must comply with Shari’ah principles and concepts. The principles presented within the spectrum of Shari’ah are not only directly demonstrated through their transactions but in the extent of its comprehending the Maqasid al-Shari’ah. It has been a long-standing criticism that Islamic financial products resemble conventional financial ones (Ayub, 2007; Beck et al., 2010; Dusuki & Abdullah, 2011). One of the criticisms relating to Shari’ah that have been hotly debated is the recognition of beneficial ownership in financial structuring and mechanics. This has been argued as a violation of the concept of ownership as envisaged in Shari’ah, which in turns, contradicts the Maqasid al-Shari’ah (Al-Amine, 2011). This issue has become apparent because Islamic finance is also required to observe similar regulatory and legal frameworks applied to conventional finance. This poses a challenge to Islamic finance to operate within the Shari’ah framework. This paper elucidates the meaning of beneficial ownership in Islamic finance within the purview of the Shari’ah framework. In order to this, it will address the question to what extent the beneficial ownership is claimed to be in conformity with the Shari’ah requirements of ownership? The paper begins with an explanation of the concept of ownership from the Shari’ah perspective. It is followed by an analysis of the meaning of beneficial ownership as intended in the Common Law, and its use in commercial transactions. Subsequently, this paper discusses takyif fiqhi (fiqh characterisation) in relation to beneficial ownership.