Islamic finance terminology comes down to five contracts, and every halal product sold in New Zealand is one of them or a close relative. Murabaha is a sale at cost plus a disclosed mark-up, and it is what EFCO offers. Ijarah is a lease and diminishing musharakah is a shrinking partnership; neither exists here, which is why Klimb Investments built a co-ownership model instead. Mudarabah and wakalah are the contracts inside managed funds such as Always-Ethical's. Qard hasan is a loan repaid at exactly the amount borrowed, which is what the AhlulBayt Centre fund is and what Good Shepherd's loans amount to for the borrower. This page defines each, names the New Zealand example or the gap, and shows how to tell which one your contract is. The is it halal hub holds the product verdicts.
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Murabaha: a sale with a disclosed mark-up, and EFCO's only product
In a murabaha the financier buys the asset you want, takes ownership, and sells it to you at the purchase price plus a profit margin that is stated to you before you sign, payable in instalments. The extra amount is the price of a thing, not the price of money, and the sale price cannot rise after signing however late you pay. EFCO's Islamic finance page lists Murabaha as its product coverage with more products coming soon, and its FAQ puts the principle in one line: the additional amount reflects a mark-up on the asset being financed. It explains that the percentage rates it advertises depict the profit rate rather than interest, and that it donates late payment charges to Variety New Zealand and the Umar bin Khattab Learning Academy rather than treating them as income.
EFCO says it has provided this financing since March 2016, that it is certified by the Shariyah Review Bureau, a Bahrain-based advisory firm licensed by the Central Bank of Bahrain, and that its Sharia board members are Mufti Muhammad and Mufti Irshad from that bureau. Pricing is not published on the page; it is quote-only, so ask for the cost price and the total mark-up in New Zealand dollars in writing. The contract-level walk-through is in our murabaha explainer. The three tests to apply to any murabaha are whether the financier actually owned the asset before selling it to you, whether the total price was fixed at signing, and whether any late charge goes to charity rather than to the lender's profit.
Ijarah: the lease, and how it differs from murabaha in practice
In an ijarah the financier buys the asset and keeps it, and you pay rent for its use. Ownership risk stays with the owner: if the car is written off, the lease ends and the rent stops, and the owner carries the major maintenance and the insurance that attaches to ownership. In ijarah wa iqtina the owner also promises to transfer the asset to you at the end, by gift or by sale for a token sum, so the economics resemble hire purchase while the legal structure remains a lease. No provider in New Zealand offers an ijarah car or home product; EFCO's page lists only Murabaha. The contrast matters because the two structures treat a bad year very differently.
| Question | Murabaha | Ijarah |
|---|---|---|
| Who owns the asset during the term | You, from the day of sale | The financier, until any end-of-term transfer |
| What the extra amount is called | Profit on a sale, fixed at signing | Rent, which may be reset at agreed review dates |
| If the asset is destroyed | You still owe the balance of the price | The lease ends; rent stops, subject to any takaful or insurance |
| Early settlement | Debt is owed in full; any rebate is at the seller's discretion | You stop paying rent; buy-out price is as agreed |
| Missed payments | No increase in price; charity-only late charge | Rent arrears; no interest on arrears |
| New Zealand availability | EFCO | None published |
Diminishing musharakah: the home structure New Zealand still lacks
In a diminishing musharakah the financier and the buyer purchase a home together, the buyer pays rent on the financier's share and buys that share in units over time, and the rent falls as the buyer's share grows until the financier is paid out. It is the structure most Islamic home finance providers in Australia and the United Kingdom use, and it needs a financier willing to hold co-ownership of houses on its balance sheet with a regulatory treatment that allows it. New Zealand has neither, which is why the halal home financing hub describes a pathway rather than a product and why the Deposit Takers Act article asks whether a new class of deposit taker could change that.
Klimb Investments is often mistaken for diminishing musharakah, and it is worth being precise. Klimb's site describes multiple investors buying a residential property with no borrowings, each investor's name on the company or entity that holds the title, rental returns and capital growth shared, and Klimb taking a small percentage of equity for management. At the Gold tier of $300,000 and above an investor may live in the house and pay a percentage of rent, and may take a fixed payment plan to buy out the remaining shareholders. That is a musharakah with an optional buy-out path, which is the closest New Zealand has to the diminishing form, built as an investment vehicle under the Financial Markets Conduct Act rather than as a loan. Our verdict stays as it was: structurally the cleanest home pathway in the country because no debt exists in it, with the absence of any named Shariah scholar as the open question.
Mudarabah and wakalah: what sits inside a managed fund
Mudarabah is a partnership in which one party supplies capital and the other supplies work, profits are split by a pre-agreed ratio, and losses fall on the capital unless the manager was negligent. Wakalah is agency: you appoint a manager to invest on your behalf for a fee, and all profit and loss are yours. Almost every modern halal fund is a wakalah, because the manager charges a percentage of assets rather than a share of profit, and that is what a management fee is. Is mudarabah halal? Yes; it is the model the Prophet's own trading relationship with Khadijah is cited for. It is simply rarer in practice because fund managers prefer fee income to profit-share.
Always-Ethical runs New Zealand's only halal KiwiSaver scheme and managed fund. Its site states that investments are limited to ordinary shares of global companies listed on US exchanges, with a target of up to 50 companies, a screen that excludes companies with more than 30% debt, and a daily check against its mandate. It does not describe its arrangement with investors in Islamic contract terms; the legal form is a unit trust and a registered KiwiSaver scheme, and the manager earns a fee whether or not the fund makes money. In contract terms that is wakalah bil istithmar, investment agency, and the investor bears the whole market risk. Nothing in that is a problem; it is the normal structure, and the questions that matter are the screen and the fees, which the fund's reviews on this site cover.
Qard hasan: the loan with nothing added, from a mosque fund and from two charities
Qard hasan means a loan in which the borrower repays exactly what was lent and nothing more, with any extra given voluntarily by the borrower and never stipulated. The AhlulBayt Centre's fund is the purest example in New Zealand and its published terms read like a textbook: a maximum of $10,000, a maximum term of one calendar year, repayment preferably beginning within six months, a guarantor who provides cheques for the loan amount, and an express statement that the borrower is not obliged to give back anything above the amount borrowed but may present a gift or donation willingly. It is open to the centre's members only.
Good Shepherd NZ and Ngā Tāngata Microfinance are secular charities whose loans have the same economics on the borrower's side: no interest, no fees, repayment of principal only, up to $15,000 at Good Shepherd and up to $5,000 at Ngā Tāngata. Good Shepherd's partners page says BNZ provides a credit facility behind its loans and Ngā Tāngata says it is backed by Kiwibank. Whether interest passes between the banks and the charities is not published, and for the borrower it does not change the contract they sign, any more than a shop's overdraft changes a customer's purchase. The fiqh of that distinction is examined in our verdict on New Zealand's zero-interest loans.
Side by side: who bears the risk, what the provider earns, who uses it here
| Contract | Who bears the asset or market risk | What the provider earns | New Zealand example |
|---|---|---|---|
| Murabaha | Customer, once the sale completes | Fixed mark-up on the sale price | EFCO |
| Ijarah | Owner, for the life of the lease | Rent | None published |
| Diminishing musharakah | Shared in proportion to ownership | Rent on its share, then sale of units | None; Klimb is the nearest relative |
| Mudarabah | Capital provider | Agreed share of profit | None published in NZ funds |
| Wakalah | Investor | Management fee | Always-Ethical funds, by legal form |
| Qard hasan | Lender, with a guarantor in practice | Nothing | AhlulBayt fund; Good Shepherd and Ngā Tāngata economically |
How to read your contract and name the structure
- If the document is headed sale, purchase price, deferred price or profit, and title passes to you at the start, you are looking at a murabaha.
- If it speaks of lessor, lessee, rent and a transfer at the end of the term, it is an ijarah, and the owner should be carrying the risk of total loss.
- If you hold shares or units in an entity that owns the property, with buy-out rights over other holders, it is a musharakah, and the test is whether any debt sits inside the entity.
- If you receive units in a fund, pay a percentage management fee, and bear all gains and losses, it is a wakalah; a profit-share instead of a fee would make it a mudarabah.
- If the only obligation is to repay the amount advanced, with no fee, no mark-up and no stipulated gift, it is a qard hasan, whoever the lender is.
- If the document quotes an annual interest rate and nothing else, the structure is conventional regardless of the brand; New Zealand consumer credit disclosure can oblige a provider to state an annual rate, so look for the cost price and mark-up alongside it.
Where each structure is strongest and weakest for the customer
Murabaha gives certainty: the total you will pay is known on day one and can never rise. Its weakness is rigidity, because the debt is owed in full even if the asset is lost and early settlement rebates are discretionary. Ijarah is kinder when things go wrong, since the owner carries the asset, but you build no equity until the end and rent can be reset. Diminishing musharakah is the most balanced home structure, with equity building from the first payment, and it does not exist here. Wakalah funds are transparent and liquid, and their weakness is that fees are charged whether or not you earn anything, which is why the long-term fee arithmetic deserves attention. Qard hasan is unbeatable on cost and limited on size, speed and eligibility.
Verdict: which structure you should be looking for
If you need a car or equipment now, the only certified structure in New Zealand is EFCO's murabaha; insist on the written cost price and mark-up and apply the three tests above. If you want a home without a bank mortgage, understand that no ijarah or diminishing musharakah product exists, that Klimb's co-ownership is a musharakah investment vehicle rather than a financing, and that cash, family capital and the KiwiSaver first-home withdrawal remain the practical route. If you are investing, expect a wakalah, judge it by its screen and fee, and do not look for a mudarabah you will not find.
If you need a small loan, qard hasan is available from the AhlulBayt fund for its members and in economic substance from two charities for eligible households. Facts checked against efco.co.nz, klimbinvest.co.nz, always-ethical.com, ahlulbayt.nz, goodshepherd.org.nz, ngatangatamicrofinance.org.nz on 19 September 2026.
Frequently asked questions
What is the difference between ijarah and murabaha?
In a murabaha you buy the asset from the financier at a fixed mark-up and own it from the start, so you owe the price even if the asset is destroyed. In an ijarah the financier owns the asset and you pay rent for its use, so the owner bears the risk of loss and you build no equity until any transfer at the end. New Zealand has murabaha from EFCO and no ijarah product.
Is mudarabah halal?
Yes. Mudarabah is a profit-sharing partnership between a capital provider and a manager, with profit split by an agreed ratio and loss borne by the capital unless the manager was negligent. It is one of the oldest recognised Islamic contracts. Most modern funds use wakalah instead, charging a fee rather than sharing profit, and that too is permissible.
What does diminishing musharakah mean and does New Zealand have it?
It means a partnership that shrinks: the financier and buyer co-own a home, the buyer pays rent on the financier's share and buys it out in units until the buyer owns everything. No New Zealand provider offers it. Klimb Investments runs a co-ownership investment model with an optional buy-out path, which is the nearest relative, but it is not a financing product.
What is qard hasan and who offers it in New Zealand?
Qard hasan is a loan repaid at exactly the amount borrowed, with any extra given voluntarily and never required. The AhlulBayt Centre on Auckland's North Shore runs a member fund with a $10,000 cap and a one-year term. Good Shepherd NZ and Ngā Tāngata Microfinance are secular charities whose no-interest, no-fee loans have the same economics for the borrower.
Is Klimb Investments a diminishing musharakah?
Not in the strict sense. Klimb's site describes investors buying residential property together with no borrowings, each named on the entity holding title, sharing rent and growth. Gold-tier investors may live in the house, pay a share of rent and buy out other holders on a fixed plan, which gives it a diminishing character. It is structured as an investment under the Financial Markets Conduct Act, not as home finance, and no Shariah scholar is named.
Compare providers in your region
See side-by-side comparisons of Shariah-compliant products, or let our matcher recommend the best options for your situation.
Why do Islamic finance providers quote a percentage rate if they do not charge interest?
Because the percentage is a way of expressing the mark-up or rent over the term, and because New Zealand consumer credit disclosure can require an annual rate to be stated. EFCO's FAQ says its rate depicts the profit rate on the asset being financed. The substance test is whether the figure is a fixed mark-up on a real sale or a charge for the use of money.
