Harris Irfan, CEO of Cordoba Capital Markets and advisor at OnRamp MENA, dives into Islamic finance and Bitcoin's ethical dimensions. He shares his journey from conventional finance and discusses the unique challenges Islamic finance faces in today's fiat systems. Particularly intriguing is his perspective on Bitcoin as a potential modern currency that aligns with Islamic principles. The importance of real economic transactions over speculation is emphasized, along with evolving custody solutions for Bitcoin and the promise they hold in reimagining finance.
Harris Irfan's journey reflects a transition from conventional finance to pioneering Sharia-compliant financial products and Bitcoin investment.
Islamic finance is centered on ethical practices and risk-sharing principles, highlighting the importance of a value-driven financial system.
Bitcoin is perceived as a revolutionary monetary system that could align more closely with Islamic finance principles than traditional assets like gold.
Deep dives
Harris Erfan's Journey in Finance
Harris Erfan's career in finance began unexpectedly after studying physics, where he initially aimed to become an astrophysicist. He transitioned into investment banking, feeling more fulfilled in project finance, which focuses on financing infrastructure projects like roads and hospitals. His breakthrough came when he moved to Dubai to help develop Deutsche Bank's corporate finance business during the early establishment of the city as an international financial center. Erfan's unique experience was marked by the creation of the first Islamic finance team at Deutsche Bank, which aimed to innovate Sharia-compliant financial products.
Innovations in Islamic Finance
Erfan played a pivotal role in revolutionizing Islamic finance by introducing sophisticated financial products, such as structured investment and acquisition financing on a Sharia-compliant basis. Alongside renowned theologians, he pioneered the development of Islamic bonds, or sukuk, and orchestrated landmark transactions, including major leveraged buyouts in the region. These innovations juxtaposed conventional banking practices with Islamic finance principles, promoting risk-sharing and ethical investment. This unique blend of financial acumen and religious compliance positioned him at the forefront of a rapidly evolving industry.
The Challenges of Islamic Banking
Erfan emphasized the inherent difficulties within Islamic banking systems, likening the constraints to playing water polo while wearing American football gear. The friction arises from the need to adhere to strict Sharia laws, which restricts the ability to create interest-based financial products commonly used in the fiat world. This limitation poses a competitive disadvantage in today’s financial system, leading to challenges in adopting innovative practices that align with traditional Islamic finance values. The need for ethical financing must contend with the established norms of fractional reserve banking, making true risk sharing challenging.
Bitcoin: A New Paradigm for Islamic Finance
Erfan's exposure to Bitcoin shifted his perspective on sound money and its alignment with Islamic finance principles. He saw Bitcoin as a potential revolutionary form of money that could facilitate ethical financing by breaking free from the constraints of fiat currency. The inherent properties of Bitcoin, such as decentralization and scarcity, resonate with the ethical imperatives of Islamic finance, promoting real economic transactions and partnership-oriented financial relationships. Ultimately, he believes integrating sound monetary principles with Islamic finance could lead to an ethical financial system accessible to all.
A Vision for the Future of Finance
Erfan envisions a future where finance is more aligned with real economic activity through innovative practices like profit-sharing and ethical investing. He critiques the prevalent VC model, which relies heavily on leveraging debt and high-risk strategies in today’s fiat environment, and argues for a shift toward sound money principles. In a world utilizing Bitcoin, improved investment decision-making is essential, which may lead to healthier market dynamics and economic growth. His approach aims to realign financial incentives and promote a harmonious relationship between investors and businesses, ultimately prioritizing ethical financial practices.
Harris Irfan, CEO Cordoba Capital Markets & Advisor at @OnrampMENA joins me to discuss challenges and opportunities within Islamic finance, ethics of finance in business and the intersection of Islamic finance and Bitcoin. Harris highlights building a financial system focused on real economy transactions, sharing insights on finance, custody, and Bitcoin investment.
Summary
In this conversation, Harris Irfan discusses his journey from conventional finance to Islamic finance and Bitcoin. He explores the challenges and opportunities within Islamic finance, particularly in relation to ethical finance and risk-sharing principles. The discussion delves into the intersection of Islamic finance and Bitcoin, highlighting the potential for Bitcoin to serve as a sound monetary system that aligns with Islamic principles. Harris emphasizes the importance of creating a financial system that prioritizes real economy transactions over speculative practices, and he shares insights on the future of finance, custody, and investment decisions in a Bitcoin standard.
Takeaways
Harris Irfan transitioned from conventional finance to Islamic finance and Bitcoin.
Islamic finance emphasizes ethical finance and risk-sharing principles.
Bitcoin is viewed as a modern form of sound money, potentially more Islamic than gold.
The challenges of Islamic finance are exacerbated by the fiat banking system.
Custody solutions for Bitcoin are evolving, with a focus on self-custody.
Cultural perspectives on money influence the adoption of Bitcoin in Muslim communities.
Trade finance can be structured to align incentives between investors and businesses.
The VC industry may need to adapt to a sound money standard.
Hurdle rates for investments will change in a Bitcoin economy.
Optimism about the future of Bitcoin is essential for its growth.
Timestamps:
(00:00) - Intro
(01:04) - Harris’s background with finance & Islamic banking
(07:44) - Comparing Fiat banking with Islamic finance
(12:06) - The intersection of Islamic finance and Bitcoin
(18:21) - Custodying Bitcoin - Individuals vs. Trusted custodians
(25:51) - What are misconceptions about Bitcoin among muslims?
(30:20) - What are the cultural differences when operating on a Fiat Standard vs Sound Money Standard?
(33:27) - What does it mean to share risk in finance?
(39:12) - The viability of different financial models
(45:35) - What would finance look like in a Full Reserve Bitcoin banking world?
(54:17) - How does one navigate with morality & ethics in the current Fiat world?
(59:00) - Bitcoin compared to hurdle rates in investment decisions
