Goldman Sachs is facing new controversy, this time in the Islamic world. Goldman, the first U.S. bank to venture into Islamic finance, issued a prospectus for an Islamic bond, or sukuk, on October 18, 2011. In order to conform to Islamic prohibitions against interest income, the sukuk must represent ownership in assets, and payments should be tied to the profitability of those assets. However, Anjuli Davies reports that a number of sharia scholars, cited in Goldman’s prospectus as potentially approving the issuance, have not even seen the document:
Goldman Sachs’ controversial $2 billion Islamic bond programme faced a fresh challenge on Wednesday as it emerged that at least two scholars named as potential approvers had not even seen the prospectus.
Asim Khan, an adviser to Goldman on the issue which needs approval from sharia scholars to proceed, confirmed media reports that three of the eight scholars listed as potential approvers had not responded to requests to endorse the issue, but he said their lack of co-operation had no bearing on its sharia credentials.
Goldman’s first sukuk, also the first by any U.S. bank, is already facing suggestions that it may contravene religious principles by using proceeds to lend money to clients for interest, accusations rejected by the bank’s adviser.
Different experts have said that the Goldman sukuk does and does not comply with Islamic law, but the current controversy places the entire bond issue in serious jeopardy. For more, please read the full report from Reuters.