Harris Irfan’s book ‘Heaven’s Bankers: Inside the Hidden World of Islamic Finance’ provides a personal account of his experience as an Islamic banker in Dubai leading up to the financial crisis and post. Harris graduated from the University of Oxford with a B.A. and M.A. in Physics, he subsequently rose to prominence in the Islamic finance industry where he was a Director at Deutsche Bank for 11 years, the Global Head of Islamic Finance at Barclays Capital for 2 years and he is currently the Managing Director of the European Islamic Investment Bank. His book provides an insiders perspective of the development of the Islamic finance industry in Dubai, in particular the tension between maintaining the Shari’ah compliance of complex financial products and the profitability of these products for the conventional banks. ‘Heaven’s Bankers’ is the first book to explain the development of Islamic Finance from an insider’s perspective and it has been well reviewed in the New York Times, Financial Times, and the Wall Street Journal.
The Islamic finance industry, in its modern form, has been around since the 1960’s as a means of Muslim majority governments to provide financial services to their population in an era of post-colonial independence movements. The struggle for the industry has been to uphold the Shari’ah compliance of financial products while working within a globalized conventional financial system. There have been numerous success stories within the industry, in particular Malaysia’s hajj (pilgrims) fund (Tabung Haji) founded in 1963 that established a government-backed fund with citizens deposits to provide funding for Malaysian citizens that wanted to make pilgrimage. Since then the industry has developed leaps and bounds, alongside the conventional system, and there is perhaps no one better positioned to explain the phenomenon of modern Islamic finance as Harris Irfan.
Harris explains that after 9/11 there was a return of Gulf funds that were invested in the US that led to the boom of investment in the GCC, in particular Dubai. As a result western conventional banks were interested in investing these funds for the financiers, yet the financiers wanted the investments to be Shari’ah compliant. Through his book he provides examples of deals that he worked on which brought forth the tension within the industry.
The infamous ‘Safa Towers deal’ (Al Safwa Tower Dal Al Ghufran Hotel) was the structuring of Sukuk (Islamic bond) issuances for the development of luxury hotels and retail space for pilgrims in Mecca beside Masjid Al Harram, the holiest site for Muslims. Harris was a member of the Deutsche Bank team that initially attempted to structure the Sukuk, which was marred with numerous problems, the most significant was the lack of knowledge of the Shari’ah by conventional bankers who wanted to merely replicate conventional structures to achieve the same rate of return as a conventional bond. A point to note is that Shari’ah compliant structures are not mutually exclusive from conventional structures. The concept to venture capitalism (equity based investment with a profit and loss sharing mechanism) is similar to musharakah contracts, with individuals like Dr. Benedikt Koehler arguing that Muslim trade with Europe in the early 11th century may have transferred this concept to Europe. Beyond the difficulty of ensuring the contract for the ‘Safa Towers deal’ was Shari’ah compliant, the larger question – one which Harris ponders himself – did the towers in themselves meet the higher objectives of Shari’ah (maqasid al shari’ah). Dr. Mehmet Asutay from Durham University has also questioned whether the completed projects of Shari’ah compliant contracts actually meet the social benefit requirements of Shari’ah. Unfortunately, in the world of high finance Islamic finance rarely does meet these ends, we have the Al Safwa Tower Dal Al Ghufran Hotel to bear witness of that.
Harris provides an insight into what happens at the bargaining table in the world of Islamic Finance, an experience that very few people have had and he explains this experience by providing details of financial contracts simply enough for beginners to Islamic finance to understand. However the book should be read with a caveat, it does not represent the entire Islamic finance industry. Rather it provides a detailed account into the world of high finance and the difficulties that comes with this terrain. Perhaps the industry should be separated into two separate spheres, with the current practice called ‘Islamic luxury finance’: billion dollar Sukuk (Islamic bonds), luxury real estate purchases in Knightsbridge, and the financing of behemoth towers built around the holiest site of the Muslim world via building over historic archeological sites. The second industry should be called the ‘Islamic moral economy’ describing financial transactions that meet the social benefit of its contractual arrangements and the manifestation of Shari’ah compliance. Muhammad Yunus and the Grameen bank movement can be seen as a catalyst for this movement as it inspired the development of KIVA the world’s largest interest-free micro-finance crowd sourcing platform in the world, providing access to capital to low income individuals in the rural parts of the world. There may come a point in time when ‘Islamic luxury finance’ can shift towards manifesting the Shari’ah compliance of its contractual structures and participate in the ‘Islamic moral economy’, but until then we will need more Harris Irfans of the world to stick to their morals and lead the way.