Goldman Sachs is facing fresh controversy, this time in the Islamic world, Reuters reports.
The claim sparking the outrage: in the prospectus for an Islamic bond, Goldman cited at a number of religious scholars as potentially approving the issuance.
Now, three of those scholars have yet to reply to requests for approval and two say they have not even seen the prospectus for the transaction.
Goldman’s advisor on the deal, Asim Khan, said this did not impact the sharia credentials of the issuance, because the scholars in question were only listed as potential approvers.
However, this is not the first controversy the transaction has encountered:
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.
In order to conform to Islamic prohibitions against interest income, a so-called sukuk must represent ownership in assets and payments should be tied to the profitability of those assets. At maturity, the sukuk purchaser is due not the principal paid initially, but the current market-value of the assets.
Because of these complexities, scholars have different interpretations of what can qualify as an Islamic bond, with some dismissing them outright, while others take a much more permissive view.
Contact Ben Walsh at [email protected]