Islamic banking is an oxymoron, says Harris Irfan

The book that started as a confession

The episode opens with Muzamil introducing Harris Irfan as one of the leading Islamic finance bankers of his generation — previously global head of Islamic finance at Barclays, co-founder of Deutsche Bank’s Islamic finance team, and now managing partner of Cordoba Capital. Muzamil admits he sent a cold message expecting nothing and got an answer.

Harris’s first book, Heaven’s Bankers, is the entry point. He explains that it documents an inflection point in the industry roughly twenty years ago, when Deutsche Bank moved him from London to Dubai to open its office in the DIFC. Clients there began asking for sharia-compliant transactions, and the team had to learn the discipline from the ground up. They hired Sheikh Hussein Hamid Hassan — the scholar Harris describes as “the grandfather of modern Islamic finance” — and began structuring multi-billion-dollar sukuk to acquire companies, finance airlines, and fund governments.

He is careful not to romanticise that period. “What the bankers did was abusive to the industry,” he says. The book, in his telling, is partly a celebration of what was built and partly a record of how it went wrong. That tension runs through everything else he says in the conversation.

Why Islamic banking is an oxymoron

Muzamil presses the question most listeners are thinking. If sharia-compliant banks in Pakistan are charging the same rates as conventional banks — sometimes higher — and not passing through state-bank rate cuts to depositors, what exactly is Islamic about them?

Harris’s answer is unusually direct for someone with his résumé. “I think the phrase Islamic banking is an oxymoron,” he says. The problem, he insists, is not that the numbers look the same. Profit is permitted in Islam. Trade is permitted. Wealth is permitted, provided it circulates. The problem is structural.

He walks through it carefully. A bank, by legal definition, is an institution that takes deposits and lends money. But the central bank does not require it to lend only what it has taken in. With a hundred in reserves it may lend a thousand, sometimes more, sometimes with no reserve ratio at all. “Where did nine hundred come from?” he asks. “It was invented from thin air.” A visiting Martian, he says, would conclude this was fraud.

That, for Harris, is the disqualifying feature. Islamic banks operate under the same regulatory framework as conventional banks. They have the same legal power to create new money in the act of lending. The halal contracts — wakala, musharakah, mudarabah — sit as an overlay on top of a money-creation business. The contracts may be rubber-stamped, but the underlying act is not permissible. “The very act of creating money in the act of lending, credit creation, that’s money creation. And that’s not allowed in Islam.”

What riba actually means

Muzamil asks Harris to define his terms, and the answer reframes the whole conversation. Riba, in popular usage, is translated as interest. Harris says the word literally means surplus or excess — any excess of money on money. He cites the hadith naming six items as money: gold, silver, wheat, barley, dates, and salt, exchangeable only spot, hand to hand. A hundred pieces of silver for a hundred pieces of silver. Anything more is riba.

The deeper objection is moral, not arithmetic. Riba creates an asymmetric relationship. A lender who is repaid regardless of outcome has no incentive to do careful due diligence on what the borrower is actually building. “Do you think that when a banker is evaluating the acquisition of another company, that he’s really taking risk on that acquisition?” Harris asks. “Or is he saying it doesn’t matter because I’ll get my money back, so I don’t need to do a lot of due diligence on this?”

The Islamic ideal he describes is the opposite: a financier who must act as a partner. Due diligence on the business, the management, the customers, the suppliers, the market. Profit and loss shared on an agreed ratio, fixed in advance. Real-economy transactions underpinned by real assets. “I’m aligned with you. I’m incentivised with you,” he says. It is a different paradigm, not a re-papered version of the same one.

How fiat money built the debt trap

Muzamil tees up the obvious objection. The Western system, however flawed, has delivered modern prosperity. Maybe the old wisdom is just old.

Harris pushes back hard. “Ancient wisdom is always more valuable than contemporary thought,” he says, and then he runs the timeline. Roosevelt’s 1933 expropriation of private gold. Nixon’s 1971 removal of the gold peg. The transition to fiat money — currency by decree, backed by nothing. Once the peg is gone, governments can print, and printing inflates the money supply, and inflation makes everything more expensive. His parents’ generation could run a household on one income. His generation, in the developed world, cannot. The reason, he says, is that everyone is servicing debt, and the debt exists because cheap money inflated the price of every asset that matters.

He frames it as a loop. “More debt, more cheap money, more inflation, another crash. Borrow, spend, consume. Borrow, spend, consume. This is the cycle that we now live in.” He notes that Pakistan has gone to the IMF twenty-four times and has been poorer at the end of each programme. The diagnosis, in his telling, is not the patient.

The connection to perpetual war is a striking aside. Since the gold peg came off in 1971, Harris argues, the United States has remained in a continuous state of war because it can finance war silently — by devaluing the money in every citizen’s pocket. “Fiat money is evil. Fiat money leads to mass slaughter. Fiat money has led to the greatest mechanised murder of people on the planet in history in the last hundred years.”

Why he believes Bitcoin is the most Islamic money ever invented

Harris knows where he will lose half the audience, and he says so plainly. The pivot is a story he tells against himself. In 2017, after a lecture on Islamic finance, someone in the audience asked him about Bitcoin. He admitted he knew nothing about it. The questioner walked him through its properties live, in the Q and A. Scarce. Finite. Divisible. Peer-to-peer. Proof of work required to mint each new unit.

“Wait,” he says he thought. “So you’re telling me it’s like gold. But it’s better than gold because it’s electronic.” He went away and researched it for himself. He returned with a conclusion that still costs him friends: “I now consider it to be the most ethical and Islamic form of money ever invented.”

His defence rests on a re-reading of the hadith of the six commodities. He argues it does not specify the only permissible forms of money — it specifies the rule against riba in their exchange. Anything that society treats as a medium of exchange can function as money. Cigarettes in a prisoner-of-war camp. Seashells on a Pacific island, until a European ship arrives carrying a cargo of beads and inflates the supply. The qualifying properties, he argues, are scarcity, fungibility, durability, and proof of work — and Bitcoin satisfies them better than gold does in the modern world.

Gold, he is careful to say, is still good. He keeps it. But gold requires custodians, intermediaries, and trust. He has worked inside the institutions that custody gold-backed ETFs and he does not trust them. “If I were to go to the vaults of those institutions and say, I have this certificate in my hand which shows I own x amount of gold. Please open the vault and show me my gold. They won’t do it.” Bitcoin, held in self-custody, removes the third party. “Not your keys, not your coins,” he says, conscious that the phrase will mean nothing to most listeners but at least gives them a direction to read.

The volatility objection, answered

Muzamil raises the obvious counter. Bitcoin moves five thousand dollars in a day. That is not money you can pay for groceries with.

Harris concedes the medium-of-exchange point — for now. As a daily currency Bitcoin is not ready. As a store of value, he argues, it already is. He notes that across any three-year window in Bitcoin’s history it has not lost money, and that its volatility today is comparable to large-cap technology stocks. The trajectory, mathematically, is toward a steady state as the network matures. “I never look at Bitcoin on a day-to-day basis,” he says. “I look at my portfolio once a year, and I think on a twenty-year basis when I retire.”

Muzamil offers a reframing that Harris endorses immediately: it is not that Bitcoin is rising, it is that every other currency is falling. “Very well put,” Harris says. “They don’t look at Bitcoin being volatile. They look at everything else being volatile.”

He extends the argument into a recommendation aimed squarely at Pakistanis. Convert a small portion of monthly income. Hold it in self-custody. Do not store it on an exchange. He cites Lebanon and Gaza as places where Bitcoin has become, in his words, a literal lifeline.

The scholar who would not listen

One of the most pointed anecdotes in the conversation is about a senior Pakistani scholar — unnamed, but associated with the Afghan regime when the Taliban returned to power. Harris approached him with a proposal. Roughly seven billion dollars of Afghan reserves had just been frozen in US banks. Why not advise the new government to hold its citizens’ wealth in a form of money that cannot be censored, sanctioned, or frozen by a third party?

The scholar’s response, Harris says, was telling. “Oh, you know, this Bitcoin, it’s all very well. But don’t you think that we should be teaching them about Islamic banking first?” Harris’s reaction was unsentimental. “I said, woah, forget about this. This is a waste of my time.”

Muzamil asks the natural follow-up: why do scholars rubber-stamp Islamic banking products that, on Harris’s own analysis, cannot be compliant? Here Harris is careful to defend them. He names Mufti Taqi Usmani, Dr Dawud Bakar, and Sheikh Hussein Hamid Hassan as men whose intellect and integrity he respects without qualification. Their fatwas, he says, are always context-bound — halal in this place and this time, given the surrounding economic system, not for all time. Their job, he argues, is to uphold the sharia as it stands, not to invent a parallel financial system. “It’s actually financiers, people like me, practitioners, who are there to invent new products and then convince the people and the scholars that this is something wholesome that we should all be using.” He notes that a younger generation of scholars is beginning to work at the coalface alongside practitioners.

Pakistan, the IMF, and a country run by criminals

Muzamil pulls the lens back to geopolitics. The United States, he argues, has been absorbing the world’s productivity for decades and may no longer be able to. The BRICS bloc is rumoured to be exploring a gold-backed currency. Pakistan, meanwhile, is reportedly preparing to sell fifteen percent of the Reko Diq mine — said to hold reserves worth eight hundred billion dollars at current prices — for roughly a billion and a half.

Harris flags that geopolitics is not his specialism, then offers his view as a citizen. “Pakistan is, in my opinion, a country that is run by criminals, and they themselves have a slave mentality. They’re happy to be ruled by foreign interests.” He believes the United States is a ticking time bomb, outplayed by China on electric vehicles, education, and industrial policy. The right preparation for a country like Pakistan, he argues, is to build reserves of sound money — gold or Bitcoin — at the household level if the state will not.

He repeats, with feeling, that custody matters. The government, in his framing, is the biggest single counterparty risk a citizen faces. “Not your keys, not your coins.”

What Cordoba Capital is actually building

Toward the end, Muzamil asks Harris to describe his current project. Cordoba Capital Markets, a subsidiary, issues what Harris calls a profit-participating note — a PPN. It is structured as a return to the pre-banking model of the prophetic mudarabah. He retells the original arrangement: the Prophet, peace be upon him, managed his first wife’s capital, sent a caravan of goods beyond the city walls, traded in the marketplace, returned, and split the profit on a pre-agreed ratio.

That, Harris says, is what Cordoba is recreating in a modern instrument. Real trade. Real due diligence by both manager and investor on what the money will actually do. Profit and loss shared on a fixed ratio. Listed for now to professional investors only — institutions and family offices able to commit at least a hundred thousand dollars — because the digital-asset tokenisation platforms that would let him democratise access do not yet meet his standards of professionalism. He says he hopes that changes soon. He would like, eventually, to take a one-dollar ticket from a freelancer in Pakistan with five thousand dollars sitting idle in a wallet.

Why he is still optimistic about Pakistan

Muzamil closes by asking for a message to a Pakistani audience that is, by his own account, running out of hope. Harris’s answer is the warmest moment in the conversation.

He recounts a recent visit to study Pakistani startup incubators and accelerators, intending to bring lessons back to a project he was setting up in the UK. He says he was “blown away.” The young founders he met had ideas and, more importantly, the ability to execute them in the crucible of the market. “I saw intelligence, hard work, dynamism. Gave me huge optimism for the future.” He believes that if that generation of founders marries fintech to a real-economy, risk-sharing model, Pakistan will be fine.

He says it twice for emphasis. “My head is British, but my heart is Pakistani. My heart is more important than the head.”

Muzamil wraps at the one-hour mark with a request that Harris come back. The conversation, both men acknowledge, has only opened the door.