NZ urged to embrace Muslim cash

By ELLEN READ


New Zealand could attract some of an estimated US$1.3 trillion ($1.9 trillion) of "homeless" Muslim money if financial institutions embrace the growing trend of offering Islamic banking products.

David Vicary, of Deloitte's Malaysian Islamic banking centre of excellence, said the money had been floating around the globe since September 11, because American Muslims were reluctant to invest in the US economy.

Vicary is visiting New Zealand to promote the Islamic way of doing business and scoping out prospects.

He said because this country was seen as a safe haven and did not support the war in Iraq, some of the money could come this way. There were also opportunities for retail customers.

"We're meeting an insurance company that is keen on implementing Islamic insurance-type products. We're meeting two of the major banks in the next few days and the diary's getting filled up," Vicary said.

"The purpose of this trip is to explore the opportunities and to educate."

Islamic banking is based on shariah law - part of which says that the payment of interest (making money from money) is forbidden. Uncertainty is also forbidden.

If money is borrowed to buy a house, the bank, in effect, buys the house, adds a margin and sells it back to the investor for equal monthly payments.

Money deposited with an Islamic bank does not earn interest but the creditor receives an agreed proportion of any profit the bank makes.

The services are not limited to Muslims and women receive the same treatment as men.

According to Deloitte, more than 200 financial institutions, worldwide, use the Islamic banking and finance model.

Growing demand has prompted most major institutions - including HSBC, Citigroup, JP Morgan Chase and BNP Paribas - to set up their own Islamic banking operations.

"What they're trying to do is tap into the large amount of liquidity which is available in the Islamic market. It's mainly oil money, petro dollars out of the Gulf," Vicary said.

Locally, Deloitte has approached the Federation of Islamic Associations of NZ (Fianz) to raise the opportunity of facilitating services here.

Fianz has a 2004 goal to seek providers of Islamic products and services for New Zealand's 30,000 Muslims.

"Banks aren't willing to help such a small community because there's not enough critical mass. Now there's the chance to attract some foreign money, they're finding they're getting a bit more traction," Vicary said.

The international climate has also become more welcoming of Islamic banking. The UK has just opened its first Islamic bank and Australia is likely to follow suit soon.