Goldman Sachs Enters Islamic Finance Market Amid Some Criticism

Reuters yesterday reported on controversy that is being caused by the entry of the large U.S. investment banking firm, Goldman Sachs, into the Islamic finance market. In an attempt to bring greater sophistication to the sukuk market, Goldman created a Cayman Islands entity that will issue financial instruments based on a cost plus profit arrangement to avoid payment of interest.  The sukuk program has been registered for trading on the Irish Stock Exchange. An Islamic finance analyst in Saudi Arabia, however, has raised concern that Goldman might use proceeds of its sukuk program to fund its conventional banking activities or that the sukuk might trade on the Irish Stock Exchange at other than par value-- which would be in violation of sharia law. The managing director of an Islamic finance advisory firm rejects this speculative criticism as groundless.