Hundi system haven thriving
In the hustle and bustle of Chowk Yadgar, formerly known as the Hasting’s Memorial, a young man, whilst shouting “come purchase dollars and dinars,” can be seen frantically beckoning passersby to come check out the seemingly amazing exchange rate that is on offer.
However, this is not a one time occurrence. Scores of people visit Chowk Yadgar, colloquially referred to as Dollar Bazaar, daily for their currency exchange needs and in some cases to rely on the alternative remittance system outside of formal banking channels, referred to as hundi or hawala, which is offered here without any worry for the law. The small yet awfully crowded market consists of some 500 shops - a majority of which are currency exchange outlets, whereas the remainder are jewellery stores.
Apart from the scores of people that visit, the Dollar Bazaar is also frequently visited by investigation agencies, trying to curb the hundi system so that remittances flow through proper banking channels and the country’s foreign reserves increase - a need of the hour, if Pakistan wishes to complete a successful International Monetary Fund (IMF) review.
However, Gul Badshah, a trader at the Dollar Bazaar, who is a beneficiary of the hawala system, was of the view that agencies like the Federal Investigation Agency (FIA) were not actually serious about getting rid of the system. “The FIA conducts raids on this market on a daily basis but never seals the market. If the hundi system is illegal, then why does the FIA not seal the entire bazaar? Because the FIA officials make money from the foreign currency they recover from dealers,” he alleged. When asked why people prefer using the hundi system instead of proper banking channels, Badshah replied: “People think the hawala system is safer than banks and other money transfer companies.”
Khan Wali, who is also in the hundi business, concurring with Badshah, informed that most of the customers in the bustling Chowk Yadgar market were Afghanistan nationals. “They trust the people in this bazaar because many over here have been doing the hundi business for decades,” explained Wali, adding that another reason why Afghans relied on the hundi system was lack of literacy. “They do not feel comfortable going to banks or money transferring companies because they feel there is a lot of paperwork involved. Moreover, mostly the Afghans are trying to send or receive money from relatives across the border quickly, so they do not have time to get into unnecessary hassles.”
Officials of the FIA, speaking to the Express Tribune on condition of anonymity, confirmed Wali’s assessment. “People from the tribal areas do not have any formal education nor do they have a formal banking sector, so they rely on the efficiency of the hundi system,” an official informed. When quizzed about the FIA’s lacklustre attitude in putting an end to the system, the official laid the onus of the courts. “The maximum punishment for hundi is imprisonment for 5 years but the courts usually take a lenient view and grant the accused individuals bail as the offence does not fall under the prohibitory clause of the Code of Criminal Procedure.”
The Express Tribune also spoke to Afzal Khan Niazi, Deputy Director of the FIA, about the agency’s poor performance in curbing hundi networks, who acknowledged that the alternative remittance system was a problem but the FIA was cracking down on it. “From 2021 to 2023, around 395 people were arrested, 44 shops for hawala were sealed, 331 FIRs were lodged, and Rs 969 million was recovered,” informed Niazi.
Published in The Express Tribune, March 17th, 2023.