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Home / Business / Sharia finance growing, but not big enough to change banking compliance

Sharia finance growing, but not big enough to change banking compliance

By Aimee Shaw

New Zealand’s Muslim population is not big enough to see a growth of Shari-compliant banking options, experts in the area say.

Islamic banking, or Sharia finance, is governed by the principles of Islam.

According to Islamic law, you can’t use money to make money – it has to be from legitimate trade. It is prohibited to accept interest or fees for loans of money.

Muslim rugby player Sonny Bill Williams covered the BNZ logos from his Blues jersey while playing over the weekend, as a conscientious objection to the bank.

In New Zealand there are currently no banks operating according to Sharia law.

“I’m not aware of any banks in New Zealand that offer Islamic finance which will be compliant with Sharia law,” Ikhlaq Kashkari, president of the New Zealand Muslim Association said.

Kashkari said many Kiwi Muslims got around this by either having interest-free bank accounts, or donating generated interest to charitable organisations.

New Zealand Muslims1“What a lot of Muslims do is basically either not put money in an account that is interest-bearing or, take the interest, put it separately and donate it to charitable organisations or causes, with a view that it is best to use this money for charities and people in need.”

The Muslim population in New Zealand is approximately 50,000, with 35,000 living in the Auckland region.

Managing director of Sharia-approved KiwiSaver fund Amanah Ethical Brian Henry said there was demand for Islamic finance in New Zealand, but simply not a big enough population.

“We have two or three banks that are New Zealand created, the rest are just subsidiaries of the large Australian banks. If we can’t maintain our own big bank based on the normal stuff, then how can you have a Sharia-compliant bank when you have a Muslim population of [50,000] people.

“It’s just the fact that there are not enough clients to support a purely Sharia-based bank,” he said. “Having said that, there’s a large debate in the Muslim financial world on whether you can actually have a Sharia-compliant bank because of the way a bank works …”

Amanah Ethical has been in the market for just two years.

Henry said there was no other financial product in the market that met the “proper interpretation of the Islamic financial principles.”

The New Zealand Bankers’ Association (NZBA) said demand for Sharia-compliant banking was not big enough.

“Banks are constantly responding to changes in customer preferences. That’s certainly the case with mobile and internet banking,” NZBA chief executive Karen Scott-Howman said.

“We’re not seeing that kind of demand for Sharia-compliant banking here.”

The Muslim financial industry was the fastest growing in the world, Henry said.

Some Muslims would likely be banking overseas with alternative Malaysian and Singaporean institutions, he said.

Henry said there were “movements going on” to create an Australasian Islamic bank to look after New Zealand and Australia. The combined population of both countries would likely be able to maintain such an institution, he said.

(Courtesy: NZ Herald)

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