Māori face a number of barriers to accessing capital which can worsen financial exclusion. Some of these barriers are specific to Māori, while others are more general but may disproportionately affect Māori.
This bulletin discusses these barriers with a focus on those associated with market failures or imperfections. In simplest terms, a market failure refers to a situation where a competitive market fails to allocate resources efficiently.
The barriers identified include:
- Legislative constraints that make it challenging to use Māori land as collateral to obtain loans.
- A relationship characterised by low trust and awareness between Māori and the banking system.
- As Māori are more likely to live in rural areas, they may be more affected by 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.
In the bulletin, we also describe the various initiatives that exist or are under way in New Zealand to try to address these barriers.
The initiatives include:
- Programmes to improve data collection on the Māori economy.
- Promotion of Māori cultural training and engagement in the banking sector as well as financial literacy among Māori.
- Simplifying and clarifying the process for lending on Māori land, and banks’ creation of different products to facilitate such loans. However, uptake on these products has been low.
Improved data collection, innovations in the financial system, Anti-Money Laundering and Counter-Terrorism Financing 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.
Determining where market failures are occurring can help us identify where further public policy efforts may be directed to achieve more efficient outcomes.
This research builds on the Reserve Bank’s 2022 Improving Māori Access to Capital Issues Paper and 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.
The insights from this bulletin will be used in our Māori Access to Capital work programme within Te Pūtea Matua.
Related links
Improving Māori Access to Capital Issues Paper (PDF, 769KB)