Al Fardan: broken banking, lazy VCs and the future of finance

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Mohammed Ebrahim Al Fardan says the global financial system is broken and regional venture capitalists are neither serious nor innovative enough.

He has earned the right to say this as a Middle East VC pioneer from a century-plus family business that has outlived oil crises, wars and tech disruptions.

The head of business group Al Fardan Holding does not believe the Iran war is the biggest threat to the region’s financial systems or venture capital markets. Instead, he argues it is complacency as long-established businesses risk being caught in their “comfort zones”.

That said, Al Fardan has never had much patience with the traditional financial system.

“I always said that the financial system in the world needs to be changed. Nobody listened to me,” he says. “But when the [2008] financial crisis hit, all the shareholders realised that I was saying the right thing.”

But he doesn’t think much has changed, pointing to the minimum three days it takes for business remittances between the UAE and Europe or US. Ongoing issues between the UAE and Saudi Arabia mean these regional remittances can take weeks.

“This shows a real problem,” he says. “For the bank to be surprised that I was not happy [with the remittance delays] – that’s an even bigger problem.”

Regional exchange houses and fintechs such as Revolut could exploit these issues. If banks do not evolve, “these fintechs will overtake them”, Al Fardan says.

“Fintechs have solved a lot of the problems I see in the financial system. They became profitable, they are making money,” but they too have settled into their comfort zone and stopped innovating, Al Fardan says.

Crypto confidence – and fear

The Al Fardan family started off as pearl divers and traders in Bahrain, growing into a conglomerate with more than 50 ventures across real estate, automotive, hospitality, fintech and, increasingly, artificial intelligence, space technology and crypto.

This is what animates him most. “Crypto is the biggest untapped opportunity,” he says. “Some of the biggest and strongest world leaders are investing in crypto. So you don’t get more assurance than that.”

He credits the UAE’s regulatory framework and infrastructure for building a blockchain ecosystem that, he says, is unmatched elsewhere in the world. Al Fardan Holding’s own crypto exposure spans stablecoins and the tokenisation of real-world assets, from real estate to greenfield projects and bonds.

None of which means he’s blind to the risk.

“[Volatility] scares me. It should scare everybody,” he says. “If somebody is not scared, they should not even consider investing in crypto. It’s like swimming with the whales. If you are not a good swimmer, don’t even jump.”

The financial crash and VC boom

When Al Fardan joined the family business in 1990 armed with a global education and stints at IBM and Microsoft, it showed him things that were obvious to outsiders but invisible to companies in the region that had spent generations looking inward.

By 2007, a year before the global financial crisis tore through the Gulf’s banks and real estate empires, he had launched what is widely regarded as the region’s first venture capital firm.

“When those financial institutions and real estate tycoons were having problems, we created the venture capital,” Al Fardan says. While the rest of the market retreated, his company went looking for distressed assets and, more unusually for the time, for startups.

“This was the big opportunity then … investing in startups that are going to change and solve the problems that were created by the crisis.”

The shareholders who backed him were sceptical at first. They stopped being sceptical once the returns came in.

However, he isn’t pleased with the state of the startup or venture capital industry as it stands today.

Middle East VC activity fell to a five-year low during the first half of this year, according to data from Magnitt, with the Iran war weighing heavily on sentiment and startup funding.

“I think they are not doing enough. They are not serious enough, they are not innovative enough,” he says.

He sees the asset class as a driving force for the wider economy’s appetite for risk and innovation. If there is a lack of ideas, “blame it on the VC”.

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