Examining Māori Access To Capital
The Bulletin highlights barriers specific to Māori, including legislative constraints that make it challenging to use Māori land as loan collateral and low trust and awareness between Māori and banks. Māori are also more likely to live in rural areas and face market failures common to rural credit markets.
The market failures that tend to be associated with these financing gaps are all forms of information failure or asymmetry.
Assistant Governor Simone Robbers says that Māori face persistent barriers to accessing capital, many of which stem from market failures or imperfections.
'These barriers contribute to ongoing financial exclusion which has broader economic consequences. It can weaken the financial system's ability to allocate capital efficiently and limit the potential of the New Zealand economy, especially given the growing significance of the Māori economy,' says Ms Robbers.
Various initiatives have been introduced to address information gaps and improve access to capital for Māori. These include better data collection, cultural training, and financial literacy programmes. Steps have also been taken to facilitate lending on Māori land and develop tailored bank products, though uptake remains low.
Although the Māori economy has grown significantly and business financing gaps between Māori and non-Māori appear to be narrowing, further efforts are needed to completely close the gap and unlock the full potential of the Māori economy.
Improved data collection, innovations in the financial system, AML/CFT reforms, and further legislative changes have been identified as ways that could ease barriers and support development in a way that recognises and promotes the cultural and economic significance of Māori.
'Identifying where market failures exist is important for informing targeted and effective public policy interventions that support more inclusive and efficient financial outcomes,' says Chief Economist Paul Conway.
This research builds on the Reserve Bank's 2022 'Improving Māori Access to Capital' Issues Paper. It continues our commitment to exploring and addressing structural challenges in the financial system in line with our Financial Policy Remit and 2024 Letter of Expectations.
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