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Opportunities for Islamic Finance: A New Zealand Perspective

The time is right for New Zealand to structure a more focused economic engagement with the Muslim world. Mohamed Nalar provides an insight into the current landscape.

A number of initiatives and efforts in the past to open the New Zealand (NZ) market place for Shariah compliant investment products and services have not produced a favourable outcome. The approach has been to attract Islamic financial services to meet the needs (mainly home financing) of the 50,000 plus Muslims living in NZ as opposed to attracting Islamic capital and investment to some of the world-leading business sectors here. Given the size of the Muslim population in NZ, it is relatively easy to conclude why this approach has not produced any results to date.

On the other hand, the opportunities available through foreign direct investment into some of the business sectors would not only benefit NZ firms but also bring sustainable growth, prosperity and security to NZ Muslims and international Muslim investors.

NZ has one of the developed world’s most affordable rural land, stable weather conditions, political environment and more importantly is recognised as a world leader in the farming and agricultural industry. NZ is also the fifth largest dairy producer and the largest exporter of dairy products in the world. In addition, NZ is now opening its doors for foreign direct investment in its energy, power, transport infrastructure and mining sectors with controlled but attractive conditions.

Halal industry

NZ is the world’s largest exporter of halal slaughtered sheep meat (lamb). Annual sheep meat exports to Saudi Arabia, for example, are worth NZ$98 million (US$81.4 million), and to Malaysia NZ$37 million (US$30.7 million). Combined annual export value to Indonesia, Malaysia, Saudi Arabia and the UAE was worth approximately NZ$2.6 billion (US$2.2 million) in 2010. This represents about 6% of total exports.

The global halal meat market is estimated to be worth more than US$600 billion annually or approximately 16% of the entire food industry. This presents a huge opportunity in this sector for Muslim investors and for NZ in the future. The NZ government is well aware of this opportunity and is supportive of developing the halal meat market.

To ensure that NZ beef and lamb continue to be acceptable to Islamic markets, the New Zealand Food Safety Authority recently developed new rules for halal food certification. The new rules set out competencies required by anyone who performs halal slaughter or certifies halal meat. This is to ensure that the NZ halal food certification is robust, credible and recognised by other global trading partners, mainly in the Islamic world.

NZ gained recognition for this initiative and won the highest award in the halal industry during the World Halal Forum 2011 in Malaysia for the introduction and implementation of its halal legislation.

Other notable engagements with the Muslim world include the expansion of a burger fuel fast food chain into the Middle East region. Fonterra (a NZ dairy cooperative, the largest dairy exporter in the world) currently has a 76% share of the adult milk market and an 80% share for prenatal dairy products in Malaysia.

Prospects for Islamic finance

NZ has the reputation of being a small country but a big laboratory. As a young country that is distant from world markets, NZ has become a world-beater at finding creative solutions to a range of problems. A culture of innovation and research is pushing the country into global leadership in many fields: such as food and beverage, clean technology, high value manufacturing, information and communications technologies, biotechnology, infrastructure, petroleum and minerals, venture capital and private equity, and public sector reform and administration.

  • Ranked the most peaceful country in the world in 2009 and 2010 by the Global Peace Index, Institute for Economics and Peace.

  • Ranked joint first as the least corrupt country in the Corruption Perceptions Index 2008.

  • Ranked first in the world for protecting investors by the World Bank.

  • The first developed nation to sign a free trade agreement with China.

  • Ranked second in the world for ease of doing business by the World Bank Doing Business 2008 Report

  • Ranked fifth freest economy in the world by the 2009 Index of Economic Freedom.

As part of my study, I have come across an interesting piece of research carried out by two economics professors at George Washington University, Scheherazade S Rehman and Hossein Askari. They attempted to answer the question: “To what extent do self-declared countries actually behave like Islamic countries, i.e. following Islamic economic teachings as laid out in the Holy Quran and practiced by Prophet Muhammad?” They did this by proposing an Economic Islamicity Index, based on 12 principles derived from the Holy Quran. These principles include;

  1. Economic opportunity and economic freedom.

  2. Justice in all aspects of economic management, i.e. property rights and the sanctity of contracts.

  3. Better treatment of workers including job creation and equal access to employment.

  4. Higher education expenditures relative to GDP, including equal access to education.

  5. Poverty eradication, aid and providing basic human needs; no hoarding of wealth, i.e. economic equity, and less opulence in consumption.

  6. A more even distribution of wealth and income.

  7. Better social infrastructure and provision of social services through taxation and social welfare.

  8. Higher savings and investment rates, i.e. management of natural and depletable resources.

  9. Islamic Financial System I: risk sharing as opposed to debt contracts, i.e. a supportive financial system and elimination of speculation (Quran 2:275, 4:29).

  10. Islamic Financial System II: financial practices that include the abolition of interest (Quran 2:275, 2:275).

  11. Higher trade/GDP, higher foreign aid/GDP and higher degree of environmental preservation and vigilantly supervised markets, i.e. overall state effectiveness in achieving economic prosperity.

Using data that included conventional economic performance ranking by established sources, such as the World Bank Development Indicators, United Nations Human Development Index data, Heritage Foundation Economic Freedom Index, CPI’s (Corruption Perceptions Index) Transparency International data, and Freedom House data, the researchers ranked 208 countries.

According to their methodology and data, NZ is the country of the world that adheres most closely to Islamic Economic principles. In their conclusions, the authors surmise that: “The lack of economic development can be attributed to age-old problems of developing countries, such as inefficient institutions, bad economic policies, corruption and other traditional developing country diseases.

It is, in fact, the shortcoming of the governments, not the religion, that account for the dismal economic development in the Middle East.” The average Islamicity Index (where a lower figure means more Islamic) for countries of the Organisation for Economic Co-operation and Development (OECD) is 25, while that of the Organisation of Islamic Cooperation (OIC) countries is 139. The highest-ranking Muslim-majority country is Malaysia, coming in at #38. Only 15 of the 54 OIC countries appear in the top half of the table.


The above findings clearly indicate that NZ is in a great position to build a much stronger relationship with the Muslim world.

Whilst New Zealand is not an Islamic country and has it is own weaknesses and issues it is one of the very few countries in the world that has established a balanced moderate social system based on justice and fairness. The Muslim world needs to know this. Only then can we build successful business relationships.

TThis article first appeared in the Islamic Finance News (29 February 2012, Volume 9, Issue 8, Page 23 – 24).  For more information, please visit