Goldman Sachs in new flap over Islamic bond suspected to be not 100% halal

January 11, 2012

(A Pakistani monitors stock prices at the Karachi Stock Exchange April 4, 2011. REUTERS/Akhtar Soomro )

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.

Adviser Khan named the three who had not responded as Daud Bakar, Sheikh Abdullah Bin Sulaiman Al Manea and Mohamed Ali Elgari.

“Given that the issuance was not to take place at that stage and this was only a preliminary prospectus, it was appropriate not to pre-judge the eventual outcome or speculate which sharia scholars would eventually be available to consider, evaluate and sign off on the sharia compliance of this complex transaction,” said Khan, who is managing director at Islamic finance advisor Dar Al Istithmar.

But some of those scholars contacted by Reuters said they had been both surprised and concerned that their name was on the prospectus. Two scholars, neither of whom wanted to be identified, said they had not seen any documentation.

Read the full story by Anjuli Davies here.
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