A guest post by Harris Irfan

Over the past few years, I’ve somehow found myself being asked to comment less and less about the traditional Islamic finance industry, and increasingly on bitcoin and its relationship with the Islamic economic model. Is it the most Islamic form of money? Yes, in my opinion.

That’s kind of weird coming from someone who trained as an investment banker and then found himself applying that skillset to the Islamic finance industry. I was once a normie: I boarded a packed Tube train dressed in pin stripes, armed with a brick-like Blackberry with a proper keyboard (man, I miss those), headed for the battery farm of the trading floor in a bulge bracket firm. I spoke at corporate conferences and lectured university students on Islamic banking. I thought I had cracked the Islamic finance industry: design innovative new products, persuade the big banks to sell them to the Muslim demographic, show the world how great Islamic finance is, and eventually everyone would want to do it.

But it didn’t work out like that. Because one day I was delivering a lecture on Islamic finance and someone in the audience asked me what I thought of bitcoin. I confessed I didn’t know much about it and he told me about its properties. You’ve probably heard this all before so I won’t labour the point, but it was the usual stuff about decentralisation, immutability, scarcity, security, transferability, portability and all the rest. I said, so wait, a lot of that sounds like gold, no? My audience member said, yes, it’s Gold 2.0. And gold being the official-unofficial currency of Islam, consider my mind blown. I said, I’d have to go away and research this but it sounds like bitcoin is not what I thought it was (fake internet money for socially awkward tech bros).

That evening set me on a path. I quit my steady banking job shortly thereafter and for the last six years, I’ve been working towards the creation of a non-bank financial intermediary that implements “true” Islamic finance. Bear with me on those inverted commas, they’re kind of important.


This headline from The Times newspaper on 3rd January 2009 has been encoded as a message in the creation of bitcoin’s so-called genesis block which was launched on the same day. Why is this symbolic text important? Well, it encapsulates what is wrong with our financial and monetary system: taxpayers footed the bill for the greed and incompetence of bankers and policy makers that led to the Global Financial Crisis. More than a decade later, we are still feeling the aftereffects: rampant inflation is a function of ever-increasing money supply through quantitative easing, an economic cure akin to applying leeches to gunshot wounds.

As long as our monetary system allows for infinite money creation, as long as banks are incentivised to lend as much as possible, as long as consumers are encouraged to borrow, spend and consume as much as possible, society tends towards a dystopia of debt-slaves chained to the wheel. Don’t believe me? Check out some interesting graphs at www.wtfhappenedin1971.com.

We live in a high time preference world: human beings want it all and they want it now. We created this world to satisfy our immediate cravings via a gateway drug called riba (interest) and forgot that we are stewards of this planet. But what if we could reform our monetary system in order to encourage low time preference – saving and investing for our future, rather than mindlessly consuming today? What if the methods by which we lubricate the wheels of commerce through finance encouraged all of society to take a stake in the outcome, so that riba did not benefit only the richest? Finance for the many, not the few.

I thought Islamic finance had the answers to these questions until I re-examined the basis on which the industry operates and concluded I was sadly misguided.


Here are some things I’ve learnt over the past three decades about Islamic finance and then later bitcoin. First, today’s Islamic finance industry has too few senior executives committed to the ideals of the Islamic economic model. There are some, but their voices are drowned out and the industry is mostly an offshoot of the conventional banking industry, and therefore tends to reflect that culture and those values. This is a bad thing. If conventional investment bankers are manufacturing CDO-cubed and enjoy lending at interest, then their cousins in the Islamic banks are not offering a fundamentally different service. Customers intuitively know this and they’re not engaging.

Second, young entrepreneurs launching non-bank Islamic fintechs are solving financial problems that the Islamic banks are not addressing.  This is a good thing. But they lack access to capital and they often don’t have the benefit of experience (which generally comes from the traditional finance industry). This is a bad thing.

And finally, bitcoin is the most ethical form of money with anti-riba properties (and therefore, in theory at least, potentially a saviour of the Islamic finance industry). This is a good thing. But as much as I support those bitcoiners trying to get this message out, the “anti-riba” element of the message has become something of a distraction. This is both good and bad. On the one hand, bitcoin maximalists are evangelising for all of us who believe in a socially just economy and therefore, in my opinion, fighting the good fight. On the other hand, I fear it may mislead some into believing that the mere adoption of a bitcoin or sound money standard magically eradicates riba and solves all economic ills. It won’t.

Before we can do that, we must build institutions in the real world that operate on a real economy, risk-sharing basis. Otherwise all that will be achieved will be the replication of fractional reserve banking with a different base currency (albeit it would be harder to create new money other than via unbacked credit notes, which is how goldsmiths became bankers some centuries years ago).

So if I truly wanted to realise a socially just economic system in which companies and their financiers share the risk of doing business in a fair and symmetric way, I would need to create that institution and be able to say to the Islamic finance industry, “Hey guys, if we want to win hearts and minds, this is what we should have been doing all along”.

ISLAMIC FINANCE 2.0: 2002-2023

20 years ago, the team I co-founded at Deutsche Bank revolutionised the global Islamic finance market by inventing some of the most successful Shari’a compliant investment and financing products. We wanted to deliver the highest quality products with the best of Islamic values. The techniques we developed remain in use today but perverted from their original intent, and only to benefit the most elite financial institutions and individuals. For most Muslims, the industry has stagnated.

Why is this? Do Muslims no longer need halal investment and financing products? Of course we do! We need to finance our homes, to invest our life savings, to provide for our children and our retirements, and all in accordance with our values.

Still today, the most common questions I am asked by family and friends are:

–         “Where do I invest my money in a halal way?”

–         “How do I finance my business in a halal way?”

60 years ago modern Islamic finance set out on a journey to solve exactly these two questions. Today, I believe we finally have an answer to both.


The challenge lies in the supply of product: the Islamic banking industry has not lived up to its early promise. It hasn’t delivered the financial services that we actually need.

It has failed because the very concept of “Islamic banking” is an oxymoron. I have tried for most of my career to reconcile two opposing ideas:

1) the Islamic economic model – one that is based on social justice and risk sharing, financing the “real economy” not a parallel “financial economy”; and

2) the concept of banking, in which a bank has the legal right to create money from nothing through the act of credit creation – this is called fractional reserve banking.

The status quo will not change from within the established banking industry. Today, the vast majority of Islamic banking business is based on a contractual structure known as “commodity murabaha” (or “tawarruq”). This is a synthetic contractual structure, a legal ruse designed to mimic fractional reserve banking. Three decades ago, scholars allowed this type of contract on the basis it was an interim measure designed to allow Islamic banks to develop and evolve. Instead, the structure became the norm. Now, almost every time an Islamic bank enters into a financing contract, it is effectively creating money from nothing. This is the very definition of riba.

How do we solve this problem? What if there was a way to create investment products for Muslims that followed both letter and spirit of our faith? A financial instrument that invested in companies that made real things and offered real services. What if these companies had access to the untapped wealth of 2 billion Muslims around the world to help them grow and succeed? What if these companies neither had to rely on interest-bearing bank debt (or Islamic banks using synthetic commodity murabaha), nor on fixed-income “sukuk”, bond-like financial instruments that claim to offer Shari’a compliant contractual structures which are often highly complex, and mimic the risks and structures of conventional interest-bearing bonds?


There is a solution that simultaneously allows businesses to be financed in a halal way and Muslims to invest their wealth in a halal way. I call it “true sukuk”. “True” because it returns Islamic finance to the ideals of the Islamic economic model: that of ethical risk sharing and real assets.

I was approached by the Muslim CFO of an international agribusiness. He was disillusioned by what he saw in the Islamic finance market: even if he could find an Islamic bank to finance his high quality, medium-sized business, their terms were so burdensome and the structure so synthetic (again, commodity murabaha!) that conventional bank debt was the only viable option. A few months’ dedicated research on the Islamic finance industry had convinced him the modern practice of Islamic banking was far removed from the principles set out in his faith.

So we both set about creating a new financial instrument, one that ensures companies with robust business models and strong profits can raise working capital in an ethical and halal way, without diluting their shareholders or participating in riba.

These true sukuk are “profit participatory notes” (or PPNs): this means they participate in the actual profits of the business activity, rather than stipulate a fixed return irrespective of underlying activity or assets, a form of financing that is forbidden in Islam. The notes are listed on a P2P exchange where they can be traded with other investors. Investors typically earn double-digit yields with strong risk management in place to preserve capital.

We’ve closed our first deal, financing the working capital of that same international agribusiness.  The concept is so powerful that my client and I launched a new company, Cordoba Capital Markets, the very first fintech dedicated to financing SMEs via PPNs. This is “true” Islamic finance, if you like, because it’s fair, asset-backed financing of a real economic activity. Our focus is not just the Muslim demographic, it’s everyone, because a just economic system is for all.

Now we’re working with four other companies, preparing their businesses to issue similar PPNs. Having participated in the seismic changes that took place in this industry in the early 2000s, I’m feeling that same thrill I felt back then. This is revolutionary – I believe inshaAllah it will change the nature of Islamic finance and perhaps even finance in general.

We’re touring key locations in the Middle East and Southeast Asia soon, sharing our concept with investors and issuers. If you think we should be speaking with you, drop me a DM.

About the Author

Harris Irfan has 29 years investment banking and consulting experience. He is an internationally recognised authority on Islamic finance and fintech consulting services. CEO of a revolutionary Islamic fintech company, raising working capital for SMEs via profit-sharing notes.

Harris Irfan

Former co-founder of Deutsche Bank’s world leading Islamic finance team and CEO of Deutsche’s Islamic finance subsidiary. Former Global Head of Islamic Finance at Barclays, then Head of Investment Banking for the Rasmala group.

Currently CEO of Cordoba Capital Markets Ltd and Chairman of the UK Islamic FinTech Panel. Ranked Top 100 BAME Leaders in UK Tech by Financial Times.

Proven track record of turning around companies, and creating and managing high performance Islamic finance & banking teams. Author of “Heaven’s Bankers: Inside the Hidden World of Islamic Finance”, the critically acclaimed best-seller about the Islamic finance industry.

LinkedIn: Harris Irfan.

For more real-time updates, follow him on Twitter @harris_irfan.


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