THE APPLICATION OF BENEFICIAL OWNERSHIP IN ASSET-BASED SUKUK: A SHARIÑAH ANALYSIS

Abstract

There are two categories of sukuk namely Asset-based and Asset-backed sukuk. Assed-based sukuk is a sukuk whereby the existence of an underlying asset is sold to the investors only to facilitate the issuance of sukuk. Whereas in asset-backed sukuk, the asset is not merely used as a tool to facilitate the issuance but it is really transferred to the investor via a true sale transaction. However, in asset-based sukuk issuance, the transfer of asset to the investor is not a true sale. In simple word, only beneficial ownership is transferred to the investor while the legal title remains with the originator. The practice is seemed not to be persistent with the Shariah principle that requires the complete transfer of ownership to the buyer. In Islamic law, the ownership will determine the obligation of the owner toward his property. For example, a lessor is liable for the impairment of his property because he is the legal owner of the property while the lessee is not responsible for it because the lessee only owns the beneficial right of the property. Hence, this study is very important to determine the status of the transfer of beneficial ownership in asset-based sukuk whether it is compliant with Shariah or not? The status is vital because the result will lead to the different consequences especially with regard to the sukuk holder whether he is liable for the underlying asset or not.