Islamic Finance in New Zealand


Islamic economic system is a valid system that most people are not aware of and most people link it just for a Spiritual they have a spiritual understanding of it but it is a system that has all the elements and components of an economic system just as capitalism and socialism and welfare state systems, so it does deserve the opportunity to actually be introduced and be implemented and people deserve to know about it because it does serve a lot of social justice and fairness and and balances that to the community between like social and economic aspects Which is very important and if you look at the context or the environment that we’re in right now You know over here, we’ve got the World Bank which effectively has that mandate then we have a government currently in power which really is supportive of this at the moment, but then you also have this rising tide of I guess there’s awareness with the everyday New Zealand er around what we actually don’t want to just Engage with stuff that generates a profit we actually want to do something that’s good. So there’s this kind of social Element going on exactly and this is why now We have a working group trying to we developed a project to introduce Islamic finance and but it’s going to be a social justice financing system a social justice financing system rolls off the tongue There’s got to be some sort of word that we can use for that one, man. We will find a shorter term But we anticipate it’s gonna be like two to four years project. It’s a huge project talking about a market size of 2.2 trillion dollars around the world. I think that it’s less than in the modern history. It’s less than 100 years old So Islamic finance was used previously during the Islamic and the Ottoman Empire And then at there was a long time where it was not employed, but then it came back in the 40s and the 50s okay, just from the 40s to now it’s grow up to be that this size and if global finance magazine and an article published in 2018 stated that it’s one of the fastest growing areas in the banking industry Right and they described that as fast-growing area in the banking industry, which is interesting. Yeah, because it’s almost in a sense it’s kind of like I don’t why it’s quite a strong term to use I guess but it’s It’s not necessarily banking as we know it they were talking about the Musha rica and Marah Baja and Interest-free loans and mudarra ba and Su kook so they were talking about just that part of it Which they referred as the fastest growing. So the sizes of banks like more banks are opening more financial institution so we’re also talking about the Muslim population in the world now is 1.8 billion which is about quarter of the world population. Sure So but the way in our working group and this project we are using it or we are introducing that as social justice So it doesn’t it’s not necessarily for only Muslim population Which is a really important distinction to make because I guess some of our listeners might be thinking Well, how is this relevant to me? Well, this is Very relevant because it’s you don’t have to be a vegetarian to try the salad There are things that we can learn from all sorts of Yeah and if our system was perfect and when I say our system if he Incumbent system was perfect. Then you have fair enough Let’s close our minds, but it’s it’s not in their areas Which we can and need to improve on with the current financial system and maybe there’s some learnings here Or maybe maybe we just need to kind of zoom out if in doubt zoom out look a bigger Look at a bigger picture here a bigger picture. This is a key word because Islamic economy because Islam is one system and we have the Islamic economic system just part of the system and we have the Islamic finance Which is the implications and answers to the principles laid down by the Islamic economic system And because it’s all one system. It doesn’t only look at the financial aspect. It looks as social expect environmental aspects family Laws so many things its environmental social governance Whole thing now. Yeah exactly. These are the things so it Islamic economics. So the economic system Prohibits the overconsumption of resources and the expenditure on things that’s luxury and on. Sorry So it’s an economy it come under economic system, but it’s actually environment because we are having a sustainable System that protects our resources, correct? So this is why the while the current systems focuses on only the economic sides This system actually has a further more dimension because of that people now tends to find out quick solutions So we have a social problem. We make social organizations or social work or things like that They try to solve the issue like but they do not go to the roots of it because it’s more time consuming Its acquired more research. So any problems we have now we have an NGO that works on this issue Just solve this you not solve the problem, correct? And That creates a distortion because then that interferes with market signals everywhere else and exactly so everyone now coming with their own Solution which they it doesn’t necessarily will all match in a harmonii While the economic that Islamic economic system because it’s all one system It’s more coherent and it inclusive of all these issues or the economists. They are they don’t have the psychological Understanding, they don’t have the environmental Understanding, they don’t have the family understanding they have you know They only everyone just knows they’re experts in their area and they working in this area only That’s right that a good plumber can’t design and build an entire house. Exactly. So and a good engineer It’s not good worth lobbing Maybe or whatever so when everyone but that’s why they all have to come under one Construction company to be able to make it all match and work in harmony together. Well said that makes sense So yeah, that’s what it is. Yeah, so they so this is the economic system and under that we have the Financial system now in New Zealand Unfortunately, we still don’t have any Except for amana Kiwi a saver, which is it’s not a financing It’s so one thinks of Islamic economic system is the prohibition of trading and things that’s called or considered unethical Why Islam like alcohol, that’s right gambling pornography Yeah arms Tobacco’s and other things so a like in the current context with some KiwiSaver providers ESG Investing is kind of their mode and they exclude based on that but I guess the difference here and forgive my ignorance but the main difference here is that This was around long before we discovered it. Yep, right and pork is on the list. Oh Is that right is it Who knew right but that like but apart from that it’s actually really nothing new is it it does make sense Most of the religions prohibit the same things Yeah What would you want to invest in a regime which is encouraging child prostitution for example or munitions manufacturing aside that right exactly It makes a lot of sense. Doesn’t it and gambol incomes under the Islam financial system again. It’s prohibited speculation which is called God are in exam and that means Uncertainty, you should not enter in an agreement. That’s uncertain So gambling it’s it’s mainly uncertain you know it this is it’s based on uncertainty actually, and that does have So many negative impacts financial impacts social impacts Yeah, and we do see even in fact some families like so many people lose their money. They you know, many people cannot deny that gambling does have a negative impact on them or on their family, but in terms of financial like Financing or banking New Zealand still does not have that you as UK hosts 6x lamech banks along with another 20 lenders that currently offers Islamic financing the US has 25 Islamic institutions Australia has seven financial institutions and two Australian banks Offers Islamic – so how many New Zealand again zero? Okay, just to be really clear. Yeah. Yeah, I guess maybe we can be forgiven for making the assumption that Well the markets not big enough There’s there’s only what 60,000 Muslims in New Zealand but really is again is this just for that community is is Something that we could all potentially benefit from and this is this is what’s this project that we are working on This is what we are telling the people It’s not it’s a source from it’s derived from the Islamic system But it’s applicable to everyone and it does provide good outcomes Socially and economically and environmentally and you know and although that those other aspects so why we don’t reach us And this is what the World Bank is talking about when they said they called for financial inclusion basically the word Bank saying that Government’s obligation is to put all the options on the table and the people has the right to choose and That means you put all the available not only all the ones that you have currently if there are other options Right, you know? Yeah, so there’s that mandate a very high level before New Zealand’s put down all of the options that are currently available Not just a subset of them ones that they deem to be appropriate but all of the options. Yeah, that’s that’s an important thing I think to Note, right and I know New Zealand now is really very strong on social justice So this system does provide social justice on many different? Esperar a number of options that in Zeeland can start to introduce this either through existing banks I had a meeting with number of banks and they they said that they don’t have resources Because the demand is not high But again, we going back to the same point the demand is not high because they’re thinking of only the Islamic population. That’s right So if you actually if people know what this is about then people will choose it even if there aren’t Muslims Re-openings to all the new zealand population and it will be just like any other tools that the bank will use well We’ll introduce other option is we have other alike organizations like fianc now is very and they are very supportive of our projects How do you spell that fianc if I in is it its Federation Islamic Association of New Zealand? Yes Now Financial has the first has more than one tools or serves more than one purpose So we have things to do with making housing easier and more accessible Helping people with business to start small medium-sized business and also for investment it’s so relevant for the everyday investor in that Well ice about this way with the current system, you know interest rates are so cheap you’d be forgiven to think that well it’s let’s just get more of what we’ve already got because it’s it’s working so well in a sense, but Underneath the surface. There’s a story going on You don’t have to dig that deep and then you can reveal some significant risks structural risks that will manifest itself Arguably in the next five to ten years Yeah, maybe even sooner and we need to be open-minded about looking at some other tools some other options to borrow to buy homes together and I use that phrase purposely, you know to buy homes together rather than just Get a mortgage To invest there other ways doing that are there other ways of funding small to medium sized businesses and going even further up that chain where maybe it’s Bigger than what you’d expect businesses because there is a gap there even we’ve had people on the show talking about that yeah, how there is a significant gap with funding businesses that are already operating so you know these tools that we’re about to talk about could be used in New Zealand to Create a pathway and unlock resource for people that desperately need it. But also on the flip side from an investor’s perspective There’s a new way that you could potentially look at how investing works and you know It’s not just about a rate of return and minimizing your fees. It’s not actually just about you It’s about what impact does that create? Right and it also wasn’t by create on the whole system, right? So the ripple effect Yeah, so this is like so for example one of the main features of the Islamic finance is the prohibition of RIBA or Provision of Reba Reba is interest or it’s been referred to as usury some people define you jury as Over a certain amount of interest okay, or a certain percentage of interest some people define usury as any interest, right? So qualitative bit in the quantity, but in both cases, it’s as an extra and over amount over there the principal amount of money that you actually borrowed so the the prohibition of interest It’s I did refer to it briefly in the paper again. It has so many It’s really important because there are religious ethical and economic arguments for the prohibition of interest this Crees this increases the gaps between the rich and the poor so Pores are becoming poorer Because they have to keep paying that the interest back regardless of their economic situation And the rich are getting richer by making money out of money Right and just making money out of money itself has so many negative impacts to it it’s not just social but also Economic impact because people will be discouraged from working if you have good money in the bank You can live out of the interest of this you know, if your deposits from the saving account without the need to think about actually investing and working and Making a business and employing people and helping people become employed and get off the benefit So just the idea of creating money so this is this is a social or economic impact but there’s also like other economics impacts or the interest that Does have I wouldn’t say destroy the economy but on the long run interest its is really affecting the the circulation of money and the economy so you want to drill down into that a little bit more so It’s going only in one direction basically, so it’s in the state of everyone gets the benefit of this money People are just always being disadvantages and people are you know being advantage? It’s pretty much the same as the increasing the gap between both sure It’s money money flowing kind of upward toward the very top was what you’re saying Yeah, and you’re gonna get some of that if you’re in that hierarchical sort of structure. Yes, exactly. Exactly and there are things like so Interest does think and discourage people from borrowing money if Even if they need it To do some businesses and and many people are not taking it like for either religious reason or but also many people are so worried That they cannot pay back. So that’s and then another negative impacts on that it’s Very important point the problem is with interest and because you are creating my out of money We have a lot of like increasing the size of the money But the size of production is the same interesting because it’s not backed by why is it right? Assets aren’t backing that currency anymore has moved so far away from that where it’s just right now and this is the other Principle and Islamic finances any financial transactions has to be backed by assets, right? So because we don’t want to go reach this point we don’t want to create a lot of money and don’t have real value for it and and some of the areas of behind the collapse of orly that the financial crisis was that because we have Money in the market, but we don’t have production on the other side interesting so so that’s that’s a very actually important point it is yeah other point is that This is might be more political so Banks reserves banks and federal things like in things like the state they’d have a control over the interest rate and interest rate is Basically controlling the economy. So the these institutions the Reserve Bank We cannot deny they have so much power in the economy and in the country eventually Because any politics is affected by the economy. Now the governors all of those institutions are not elected hmm, so We have an unelected people Running a democratic system. Yeah and contractor if you like. Yeah. Yeah, and this is quite dangerous because we do and vote for the people that We believe in their ideologies and what they are going to do the country but on the other side we have people who have as much if not more power or Appointed. Yeah, we don’t so this is one of the reasons one of the prohibitions of interest is It’s gonna remove some of that element of power right or its Power to people who are not the ones that you know in the right place. Yeah. I’m not Disrespecting any of the people in these positions. I’m just in theory. Yes that may be in New Zealand or other countries The government’s are those banks are really great. We’re not saying they’re bad sure, but it’s structurally There’s an issue with the structure not necessarily the people. Yeah, but the way that it’s been set up that’s kind of at a disadvantage Partly because of the whole interest rate piece, right? Yeah, and and and many people never see this point It’s been overseen for so many years that The decisions in this country might not always come through the Democratically elected government exactly exactly. I mean and if money is powerful no one can deny that it’s right, you know No one can really stay Confidently that there’s a clear separation for example between the reserve bank and there’s in government and not the federal bank and the American government and and it’s very closely connect up are meant to do borrows from And and and that’s something that’s in old countries. It does happen in all the countries So this is this is a very important point. So when we say it goes to the heart of the matter. It really does okay, this is So interesting us to the social it affects our everyday life It affects our people do have to work so hard leaving families behind because they need to repay all those dates and pay the interest credit cards are subjective think I mean We all know that it’s hard purchased payday lending Oh your interest rates out there and you when you figure out the annualized rate, it’s pretty crazy And I don’t think everyone who does money Understand this no no, no, unfortunately, no and we’re all you know, we’re all to blame Yeah, I think to be honest. I mean even if you try to educate the people Most people wouldn’t we most of us just fine, correct? Money cuz I gotta get that Cool yeah Yeah, yo, yeah, okay I can’t get to work because my my tires have just blown out I need to get an advance on my pay Exactly. No, like you said before. Those are the highest interest rates targets It’s not just a separation of the rich and poor It’s more just you taking that pour and you’re shoveling them for down that hole and this is where we talked earlier is that There’s a it’s people who works in economic. They don’t understand psychology. So When you put you think of of interest as I you know, it’s a negative a positive thing But probably the economists did not understand that people do get addicted to it People do get drained by it people do the families to try to work harder They didn’t look into these dimensions So that’s when if people only work in their area of expertise develop it but don’t understand the other impact So that’s right. That’s right. This will take us back the first point when you have a complete coherent system It actually looks at old out zoom out. Yeah, exactly Probably one of the keys to unlocking better economic understanding for me personally has been talking to my wife who comes from a psychology background Because right yeah Like how we how we conduct ourselves with our resources says way more about our mental state Then what we acknowledge that’s on a micro economic perspective, but on a macro perspective, it’s the same thing you can’t ignore the social you can’t just focus on the financial it doesn’t work and and I’m sure when you talk to someone from Environments Department, they will tell you about all the environmental impact sure of, you know people spending too much money, they get addicted to buying stuff that you know plastic things and you know, We all talking about those issues today and we don’t need it. It’s overconsumption its waste of resources It’s you know, and again, this is all profited by the Islamic economic system. So you took psychosis You talked to environmentalists. You talked to everyone will give you their own view of the same topic It’s one topic, but everyone see it from their own angle. That’s right. Yeah, interesting is that it is very true human nature So how How can we do this in you? See on yeah, or what are the tools that? We can employ so there is so because it’s an interest is okay, so we don’t have interest What do we have? We have a system that’s based on risk sharing so interest is basically risk shifting Yeah, so you shift all the risk from the lender to the borrower, correct? So you’ll have it’s all represented in an interest rate And if you’re a higher risk, then your interest rate is higher exactly if anyone is wondering how that works. Yeah. Yeah Yeah So so people who borrow the money will have to pay back regardless of so if you bunny borrow money to invest your business You know, you lost service this the fail in the business. You still have to pay it back yet in Islamic system We have a risk sharing So both parties actually share the risk Which means that in a state of borrowing money the financial institutions will become your partner So it’s called Musha Rica and mushara K means partnership So I am as a financial institution because I’m your partner I will make sure that you do a good job because I’m also learned because I’m also part of the risk So this will not just create more justice It will also create better businesses because financial institutions have better resources has better business analysts better business planning You know Department so they will that the bank or the financial institution before becoming your partner They will have to make sure your business is Well, no one can guarantee what you said because you’re sharing the risk therefore They’re going to be there’s way more in it to them because they can’t collateralize that obligation and to sell to somebody else exactly So if we’re just to boil us down a little bit and and then use an example of say an engineering firm who’s making widgets across New Zealand and they’re just buying raw material and they’re selling it out and they need to grow their business taking the next level or maybe to Export market or something like that in this type of concept where you’re there’s some sort of funding arrangement let’s say I don’t want to use the term lender because that’s Financier financier, that’s that’s probably more accurately So I’ll find out a financier assesses your risk not because they’re trying to set an interest rate But because they want to know if they can put their skin in this game, right exactly And so they’re gonna be on your team They want you to succeed not because they just want to ensure future interest payments get Back to them and the capital of entually gets paid back to them But they want to see the overall pie grow Correctly and the difference between these two scenarios is in the first term if you have a business You end up selling your business so they will give their money back. They don’t really care as much Because I’m getting my money. Anyway, even if it’s a limited liability, I’m a secured editor. I will get my money Anyway, I will do my job Yeah, you know I want to make sure I don’t get into courts and troubles and waiting too long But eventually I I will get my land. This is why we have collaterals right? You don’t pay me the money I will take the contract but the other scene are you know, I am in the game with you, right? It’s my money Yeah, and if I lose it, I lose it, right so if they are way more Conscious and they are way more careful About ensuring that this tape that you are doing in your business. That’s a good step. Gotcha so I like that so tell me if we were to just throw in a little bit of a random thing into the mix here and talk about peer-to-peer lending and in the context of Moussaka Michelle occur in that car is is it fair to say that the Financier is effectively a peer in that you are directly interacting with them No, so it will be more like the financing partners like a sleeping partner like where they just provide the money But they don’t interfere with the management if that’s your question Okay, so I’m not gonna like completos in your company and tell you how to do your work with your employees or whatever I’m just going to make my job in assessing I will need to know information about your company I will need to know about Your departments and you know a lot of things but just like just like a bank would potentially assess you This is part of any business plan, you need to know all the elements that you have before You actually give the green light and go ahead. So it’s the same but I he does not I mean eventually In Islam and in any other system contract is where you set your rules You know in the contract you put you I teach contract law and the contracts you make your own laws, you know And so this is where you in the contract you can decide whatever you like But if this is the company if it’s going to be like this is a standard form of it I don’t want to be maybe if a small business will ask the financier to get there To get involved in their business because they know they have better experts sure if they need it They want smart money John just money exactly. So they want the money and the experience and the expertise that works for them So this is will depends on the type of contract that you will have with the financier see, okay? But it it doesn’t have to be involved in the way you run your business. Gotcha It’s such an important distinction to make that it’s risk sharing not risk transfer Exactly, and that’s effectively the the core ingredient of that whole thing. Right? And this is social justice This is a lot of justice in this and people will not be they will not at least feel they’re alone Once you feel you have someone supporting you and and it does create a balance between two parties So it’s not like one party has all the power and the other one is have absolutely no power They are both together into this. Yeah, yeah So this will it doesn’t burn you, you know, you know if you lose you will have you know You will not just lose everything you will lose whatever you have put into this business like no PETA would push Erica Like there’s something called. It’s just math So the word Sunnah means production or like most nice factory. So it’s its production so sometimes it works as if someone wants to produce something like if you want to make a Factory or if you want to add a new production line They will Again provide you for this thing. So you get money for production or something or you get money? Mr Szura is to grow things. So you have a land you want to grow new plants in it, or you know? Then they will give you the money for this. So Mucha Rica is a big term and underneath it comes things That’s more specific to a specific goals. Sure. Okay, and each one have its own I don’t want to bore you with all those details, but it does have subcategories as well. I see. Okay mood audible means If I have so without that means someone provide money to another person and this person will invest this money so a has a $10,000 will give it to someone who called mudarra is the one who does madhava and this person will invest this money Of course The the first person will have to understand and what businesses Germany they’re effectively a custodian Yeah as money. Yes, so they give him the $10,000 this person Tell him I have I invest an ABCD with you know, which one you like to invest in He said, okay I like C, for example, and then you put their money and they will start to give you profits out of this So this person is takes money and we have quite big corporations and companies in the Middle East I’m not sure overseas but They’re companies people go deposit their monies. So instead of putting the money and get interest you actually put the money and invest it Right, so you are not just reduction, right? Yes happening So we go back to the same point of you are not creating money out of money You are actually having a production. So this person investing it is businesses businesses means Production means labour means value to the community, you know. So again, it’s all linked together Yes, we are giving some value to the community. Not just money, right? Gotcha. It’s not just money to getting more money Yeah, it’s actually money doing real stuff exactly You know Can you imagine of all the money that’s in the bank? Creating interest has been put into business as an investment the true. I don’t think we will have as many unemployed people Yeah, I guess you’ll have huge do you Matt? That’s right huge demand on you know people need people to know and I guess if you think about if you boil this down to some listeners right now might be Thinking about parents growing up who were quite stingy and I don’t mean this in a negative way, and I’m sorry parents I’m sure you had a really good lesson that you’re trying to teach your kids, but Maybe you really wanted to start something off the ground, you know buy a home or do something You knew that your parents had the money. Yeah, but they wouldn’t give it to you and we’re being mean. I don’t know That’s another discussion that’s no podcast probably but It’s kind of that frustration that you know that those with the gold aren’t letting go of it And if you only could just use some of it and have a fair Transaction around that you could do so much more and everybody would win exactly so it’s kind of like that, right? It’s like a little bit and this is again will take us to another Principle in the Islamic economic system is the prohibition of ordering of money. Okay. You should not our money Annie knew hoarding was bad Because again in the Islamic economy system ordering off money if you don’t use money you’ll have to pace a cat on it and this is a totally different area that I don’t want to even go into it but if aggravates a penalty it’s it’s not a penalty because it goes to good causes but it’s taking to fire two point five percent of for meeting certain conditions sporting Happen and give it to people to give it to good causes so but a human nature, you know We want to make sure that our money does not decrease with time. We can not order it. Just put it out there Rochester you Disincentivized to amass wealth without deploying it and you’re incentivized to deploy wealth exactly Okay, so this is Bush Erica which means helping in small businesses and investment This is more durable which means investment and creating money that worth value and making, you know, putting it in the market so Cooke is Basically Islamic bonds. Okay. So cook. So cook and you ki think years ago. I don’t have the information issued so cook with that I think worth of In 2014 Britain became the first Western country to issue Islamic bond trading 2200 million pound. Okay. That’s UK. Okay, you know it’s just really huge and I was just reading an article lately about even and the Mess that’s what’s going on UK. Now with the European Union people are still using so kook and issuing. So cook It doesn’t affected the government that didn’t I think the government in issuing more and more so cool Okay So so cookies bones and I will use this it’s a coke to give you an example and how it’s linked to house the property for example, so the second phase of Dubai Airport and I’m not sure which one of the African country is one of the biggest universities Builded accommodation for staff members by issuing so cool. So what is it and how it’s different from bonds? Let’s say I want to buy build something that worth ten million dollar I will issue the so coke for the worth of this project right ten million dollars And you can buy you know, they might make one suck for one thousand You know is anything you can buy as much as you want you You buy people by those who cook the money is raised to build this property now this property will be How is it going to ownership ownership is going to be moved to the final owner is by what it’s called It’s a combination of lease or rent It’s called Each other would take a bit time. I look means leasing ending with ownership. I’m sure okay could you call that rent to own rate tells it exactly rent on so I guess so this company build the houses and Someone wants to live in this house. They will start to pay a certain amount of money every week For example $500 now this $500 To let’s say 200 or 250 is going toward the capital Okay, going back to the person to get his $1,000 Yes, and the 250 is going as a rent for the using of the property But it’s going to the other person as profit right rather than rent for using the money to buy the property It’s rent for using the property itself Yes, so it’s not a like for like it’s not money for money now, it’s money for so real estate exactly So for example, so this person will own this house in 20 years so During this 20 years the person who bought that suck on also cook will receive his capital press a profit, right? So the person who buy the saqqaq will benefit. Yes the person who is buying the house will not scare up mortgage will not pay interest and if you default or if you or he cannot afford it you will sell it and The good thing is when you sell it, you will get all the money that you pay toward the capital back Right. So while with mortgage in many cases I wouldn’t say in most cases, but some Banks, what they do is if you default after five years they will tell you whatever you paid was going toward the interest Yeah, the subject what they sell it for but this this whole thing yes. Yes blow my mind say that’s awesome So that’s that’s cool. So that Again, the ownership and the underlying asset is shared, but it’s changing over time, right? Yes so the Builder or the organization who issued the saqqaq will own it and then at the beginning You know until the property actually move is so the person will pay rent and capital. Yeah The other person will receive capital and profit Yes, and then that eventually after the 20 years this whole thing will end this person will not get profits anymore and that person will own the house and the Organization or whatever corporation or institution that made this whole project will get out of it. Perfect. So they’re getting to the organization that provided this Accord they issued this book. Sorry, they get all of their capital and their profit back progressively throughout that 20 year period and From the person on the other end the book holder or the bond holder or is that what you’d call? Yeah, the person who’ll buy this so cool. So he is a holder of that’s so cool. Yeah, they are basically paying Kind of like the equivalent of a mortgage payment for lack of a better term and in that there But it’s not really the same. It’s not analogous to a mortgage It’s gonna own the house or the person will yeah the person who’s gonna own the house? Yeah, because they’re because they’re making payments but those payments are divided into two sections right one one is effectively repaying the principal or Repaying that capital back and the other one is a rent payment which would be analogous to an interest payment In the current system, but one’s money for money the other one’s money for use of the real estate It’s not well if you want to use it as interest It’s maybe for using the property because we’re using it you are Depreciating the value and you are you are actually you using something you are using Manat paying interest. You’re not being funny for nothing You are paying for a shelter for rooms for you know for you too, you know for living in a place, right? So it’s a service it’s you are getting something of value. I guess it’s just hard for like someone like me It’s just it’s really hard in terms of a mental leap. Yeah to get that without translating into Something. Yeah. Yeah, and I guess to a certain extent you just need to let go of what you know Try to think about what you what is that you’re trying to achieve and then and then because a little bit easier I guess but It’s quite it’s quite a revolutionary Fervor it might mean my Western art. It’s a very revolutionary way to approaching and UK is doing it I’m not sure if doing it for housing or not But for example into by the government issue it and the government owned it so lets it have a third party. Sure it was just two parties at that time because they paint to The people and can you imagine how much projects we can build and how much houses we can build causing the government zero? Just thinking in terms of that whole is is it’s the ultimate and decentralized financing Yeah, and also taking the burden off only one party has to pay for everything Yeah, and people well actually getting making profit, correct. So yeah, like if you had Seven hundred and fifty thousand dollars sitting in the bank. Yeah Instead of it just sitting there doing nothing. Could you do multiple? Investments exactly issue multiples the Kochs. Yeah and many people and there is actually And a small order if it’s still small but in an UK there is a corporation or company called yielders and what they do is they have like for example, there’s a house and People get they have properties and they have people who have you know, inspect the properties reefer, you know Just renovate it and make it sure it’s a good one and then people will invest in this property so they will buy Those so coke or whatever and then after ten or five years when the value of the market value of this house Increases they will pay them back. Okay, so this is a different way, okay This is investing in property, but you don’t have I cannot afford to my house for $500,000 and invested. I can only buy one room of the house Fractionalized, yes, so 10 people 20 people owns this house and this is not about Solving the housing issues, but it’s about how to invest in property without you have you know? Really a lot. So those tea odors you can invest in Four or five properties. So one property may not you know You’re not really quite sure or you don’t want to put all your eggs in one basket so you buy a house you get a one in Christchurch one in Wellington when an old client and you just Distribute your money and then after five ten years you get the profit right? Yeah, so that’s a different way That’s another way of investing in property. You’re right Yeah right And this is you know ownership and this is where you start to Kind of piece these puzzles together and you can kind of quickly say that well, hang on We haven’t mentioned bank for a few sentences here Somebody getting a little bit nervous on the other side of this Actually catches on why banks don’t take the initiative and instead of waiting for other people to do this They actually can’t do this. They have experience. They have the experts they have the resources They have everything so instead of waiting for competitors to come Why don’t I join the game and it’s gonna be much easier for me and we have a reputation people do trust us Yeah, we just need to do it make sure that we are doing it in the right way. That’s right and I think they are I think they’re one of like the right people but we also The good think about what those are cool It does have compliance as I mean there’s gonna be a lot of research done in this area what the kind of compliance we need to do and how we’re going to work on taxes and you know a lot of Lows, right? Yeah, there’s a lot of regular regulatory considerations Exactly can’t dismiss it. But I guess if they’re doing yeah this has been going on like consistently for 50 years and it’s a system which is Ancient to say the least. It’s 1,400 So we’re not really reinventing any wheels here and if we’re trying to solve some problems shouldn’t we look at what’s already working? Somewhere else rather than reinvent this wheel. So in the US, for example, though banks actually are under securities rotini and Yeah from the Reserve Banks. So they the jurisdiction of that okay in Australia They was that the government was very cooperative and they did pass some rules to support This Islamic system or what? We want to use a New Zealand to call it the social justice financing system, right? So things do exist. It has been done Yes, successfully right other part of the words, so we are not going to spend as much time We’re just going to see what other Countries did but adapted and tailor it to the New Zealand system and I like can you sense any? resistance from you know the Existing like the banks will probably say that they’re open-minded to a certain degree as open-minded as they are about crypto currencies Will investigate it and they’ll be keen to see if it works but is is can you sense that? There’s any resistance? I don’t think they will be in favorite of risk sharing No, you know they they will always like to shift all the risk, correct So they burrow are so I would write if I can shift the risk. Why would I share? It’s right and can we share it? Really just transmit it and repackage it and sell it was someone someone else So but again, that’s where it comes back to the value sure. We need valuable things We don’t need your money we need to think about how good is this going to be for the community and we all here for have been hearing for so many years about corporate social responsibility or corporate responsibility to the social How much it’s applicable it’s it’s great that you sponsor Certain organizations. That’s really great and we are very grateful for it but it I think it will also be good to be in built in the system that So if one bank take the initiative and become the first bank to provide a social justice financial system They will not attract all the Muslim communities here Which is not which is considerable But it will attract so many other people’s who really appreciate doing something for the community That that fruit is ripe. It’s right now like there’s a lot of stuff That’s all converging at same time You know the rise of yes G and then what’s happening in Australia with the Royal Commission in the banking over there? That’s the time is now to actually stop paying stuff lips. You actually have to Reconstruct from the inside out how we’re gonna behave and the time is now to actually do some stuff here and this is why the first phase of our project is education and we’re not just going to educate people on mushara car or also coke we’re gonna educate them about the Economic system this bringing value and social justice and we got to talk about why interest prohibited why? Speculation is not good why we need to be sustainable in terms of protecting the environment and our resources Yeah, people need to understand because if I just come to someone and telling him I want to do this interest interest-free system without the logic they will never miss and it was just like me I would be trying to translate it into Something that I already do know and I’ll miss the whole point of it exactly and this is why we need to go a step backward and I think the education phase in my view is very very important because People need to if people understand it they will advocate for it and we need people at vocation for this We don’t want to go against everyone. We want everyone to be on the same side Yeah, so if any of the main banks are listening know Now is a good time to have a have a chat around well How can we actually do this in New Zealand and a real in a real way? being authentic and actually embracing the whole not just part of it exactly am I correct though in Assuming that it is kind of like oil and water Where you’ve got the current financial system, and then we’re going to be talking about Islamic financing tools here Are those two things just a little bit Wow. Well, they’re very defined Yeah, is it possible that there could be an emulsifier where there could be? Something that could bind those two Agents together. It’s long. You stick to the principles of no interest no speculations No risk shifting be more fair and just and sustainable Yeah, it’s doable. You know, it’s you know, it’s nothing that you need a whole new Coming from a hot space. It’s something that sure use the same tools use the same technology I mean we all gonna use the same banking system or online banking gonna use business analyst It’s the same we have the same tool. We just need to stick to the to the same principles so right it’s not like As they can work out Exactly side so overseas where there are financial institutions overseas that are doing this it are the Islamic financing tools a subset of their overall banking operation like an alternative or is it in a bank? Which just does it depends some banks are purely Islamic Some banks are offered like in Australia to banks offers Islamic Financing. Yep This is what you just said is a very big question. It’s much more important than maybe Because it has a much deeper application now there is a of course and I want to make sure that this is In Islam, there are different schools. There are different arguments people always try to find you know The their interpretation of the rules and principles. So I’m just saying my view and my understanding yeah good point to make yeah, and the second thing it’s then when you say because we talked earlier about that prohibition of of investing in certain unethical, you know, so if a bank that offer Islamic finance windows But many people will still not use it because this money is going to be invested in unethical Investments so many people do not put and this is what Amana so many people wouldn’t deposit their money in banks Which they know they have hotels because hotel serves alcohol Right. Okay, okay, or they don’t want to invest and Like certain like marijuana. It’s just becoming legal now Yeah You know, so there are two things that we need to be very clear at there is the tools and the services Well, there is the money where is the money going and how is it visted? Sure. Okay, so though some people summoned like some people will say I only care about the way I work or the bank and This is how I will view it Some people will take a further step and say, you know, if the money is will be invested. I don’t want to contribute To more Kaka hole or more drug or more tobacco. So this is what I said The question you ask is way bigger, because what is this Bank doing is also taken into consideration right, so can the banks operate can the bank say the money that we’re gonna take from this Window is going to be invested only on those project or is that Bank? And I say I’m not gonna give you interest I’m gonna give you more Shaka But the whole the money is going to one big pool right? Gotcha So I guess and like you say there’s gonna be a spectrum of people that are ya gonna have significant issues and they’ll probably be quite You know it’s gonna be my way or not my way the highway but it’s got to be a hundred percent or Don’t even go there at all Right. Don’t don’t pretend to be something you’re not Exactly, then therefore if one of the major banks branched off and did something like it was all okay That’s not good enough because the profits are still going to support their overall to discourage banks Not discouraging banks because the hell cannot do this. I’m just saying that it’s very important for Muslims So this may not be as important for Kiwis who wants to do who wants to have a risk sharing? But it might be important for the Muslim customer who doesn’t want to invest it. Yeah, and that’s that’s the thing, right? like I know if if you cook you’re gonna have this question every now and then when someone asks for your recipe And you may or may not be keen to share that secret ingredient soup You know whatever it is, and I get that I Totally get that, right? Like if it was if it felt like that whole system belonged to me and forgive me if I’m making some assumptions And I’m not sure not everybody feels like this. But if I if I felt like hey, this is from my culture This is from my worldview. And now you’re just taking an element of it Know that I don’t like I’m come with that. You’re actually really dumbing it down It’s got to be do it. The pure way. I be a purist adopt all of it Don’t just take one one of the elements, but I wonder if for this to work in especially in the New Zealand context I wonder if there does need to be a gradual and progressive Shift where some of the tools are adopted but definitely nothing’s gonna happen overnight And this is why this project that we are trying so hard to get started on and we’re trying to get Support of anyone who can support it’s gonna be from two to four years because we need to make sure that things are done Gradually and things are being done with Exceptions and incentives. We don’t want just to put something in the market or even if someone decided to establish even someone said, okay I have this money. I want to do this Islamic financial institution. It’s not gonna work It needs time things needs time to sink and to be observed gradually So the more we talk the more we have like dialogues like this the more people listen to us the slower It’s gonna you know people may get some some listener might get a hundred percent of what we said some sorta might get twenty percent of a concern but If they have another if they find another dialogue about the same thing They will get more and slowly slowly things start to be clearer Because this is totally new to you or many other people who have no idea Yeah, that’s right and I think a lot of a lot of people myself included know that there needs to be something new You know, like instinctively. We just know that there’s got to be another ya system. There’s got to be something else and Effectively it kind of in a sense. It feels like we’re trying to build something new in our minds anyway out of old tools mm-hmm, but when you kind of see that actually there’s a whole segment of the population who’ve been doing something with tools that are Bespoke for that job. You kind of wonder well, why don’t we just do that, you know and I I don’t want to be misinterpreted as Kind of saying, you know, it’s either they all have to do this but I just it’s interesting to say that there’s this there is something that is working and You know on the flip side if you’re just a critical thinker not necessarily paranoid and not a skeptic and not You know, you know you don’t have this financial Armageddon viewpoint like a lot of people do just a healthy amount of skepticism You’d look at the current monetary system and you go, right? Well, there are some inherent risks here not with the people, but with the actual structure of how it all works There’s got to be something else and and you know, there’s I can I can see that there’s something else here, right? Yes, I mean first it’s an old system and it’s like you said it’s not something in you like it’s been there It’s been used. It’s been successful. So we just need to think About it consider it look at how you know, if we think yeah the outcome of it is really good Can we accept it can we do it can we all try to work and make it work? Yeah, good idea. Okay, cool Well, no, is it before we finish up? Is there anything else that you’d like to cover off? We’ve covered a lot of? Thank you thank you for giving you this opportunity and I I really hope it was an informative and Beneficial for the audience that way it’s good it’s good and I think a lot of people listening will probably be able to draw some Links to what they already thought about this because it’s not a new term Yeah, but a lot of people might not be operating from a place of full knowledge. Yes space and some people may have never even Have or heard about it, which is I mean many people heard about it But not in the way that we talked about it today Yes, and I think it’s it’s I hope I managed to do some you know a little bit No, you did really appreciate and I appreciate your time. I know that you you came all the way up just to see us, right So, I really appreciate your time, thank you very much and until next time thanks for catching up with us. Thank you very much Let’s go

One comment on “Islamic Finance in New Zealand”

  1. syedtalhairfan says:

    You contact details please Ma’am?

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