Time For Lenders To Back Kiwi Talent, Not Just Property

New Zealand’s lending culture, fixated on property-backed loans, is stalling the country’s potential to grow its SME sector by investing in ou greatest asset—our highly educated population.

“New Zealand’s opportunity to boost productivity, GDP and wages is not in agriculture or tourism but in our talented, entrepreneurial population,” says Meurig Chapman, CEO of Happy Prime, a leading specialist in credit risk within the corporate banking and financial services sectors.

“Kiwis are significantly better educated per capita than most other countries, which is a competitive advantage. We are innovative, outside-the-box thinkers, particularly in the digital and services sector, that, unlike the export and tourism sectors, are not encumbered by premium shipping and travel costs.

“Yet the Government, the Reserve Bank of New Zealand (RBNZ) and our retail banks have created conditions, regulations and lending products that are disproportionately concentrated in lending almost exclusively against property-backed guarantees.”

Chapman says property fixation is almost unique to New Zealand and is one of the leading reasons for our poor productivity. It hampers the growth and development of SMEs, which are the engine room of our economy.

The focus on property lending is partly a result of retail banking trying to comply with the Reserve Bank’s capital rules because they incentivise banks to lend against residential property due to the lower risk weightings required.

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This leaves less capacity for lending to businesses, particularly SMEs, where cash flow or business performance might replace physical assets as collateral. As a result, SMEs in high-growth sectors, such as technology and services, are often forced to look offshore for venture capital. While this brings investment, it also risks diluting local ownership and returns.

New Zealand’s banking approach contrasts starkly with countries like Australia and the UK, where diverse lending frameworks support SMEs through unsecured loans tied to business performance and potential.

“In New Zealand, if you don’t have property to secure your borrowing, your chances of funding are slim,” Chapman says. “This limits the ability of SMEs in sectors such as fintech, digital services, and gaming—fields with less tangible assets but significant economic potential—to grow and compete internationally.”

The Coalition Government is, through the ‘Inquiry into Banking Competition’ select committee process, exploring how the banking sector can better support SME lending as part of a broader strategy to lift productivity.

Chapman says this starts with a shift in mindset:

“Banks need to look at lending to SMEs as an investment in long-term value, much like lending to students for education. You’re betting on future potential rather than immediate returns.”

He also highlights the opportunity for KiwiSaver and other investment funds to back New Zealand businesses rather than channelling funds offshore or into residential property.

“The tech and services sectors are well-positioned to become economic powerhouses for New Zealand, offering global competitiveness without the constraints of high shipping costs. To harness this potential, the government must incentivise innovation through tax reforms and grants that support start-ups in their early, high-risk stages.

“Current policies lack the frameworks needed to encourage entrepreneurship and risk-taking.”

To shift the focus from property to productivity, Chapman suggests three steps:

1. Establish a lending environment that values business potential over physical collateral, using models from countries with more dynamic SME support.

2. Leverage KiwiSaver and other domestic investment vehicles to fund innovative, high-growth industries locally.

3. Reform tax policies to support early-stage businesses, encouraging innovation and keeping talent onshore.

“We have the skills and the talent—what’s missing is the capital and the willingness to back it,” Chapman says.

ABOUT 

Established more than seven years ago, Happy Prime is a risk consultancy firm based in Auckland that helps firms decrease or eliminate risk in areas such as a business's operational, financial, and technology functions. Most of Happy Prime's work is with banks, finance companies, and utility providers.

Happy Prime helps clients navigate regulatory challenges and economic fluctuations, offering unique, expert solutions to manage credit risk and compliance. It focuses particularly on sophisticated risk strategies to de-risk businesses from potential market volatility and regulatory oversights.

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