Unambiguous: What is hawala/hundi

This form of money transferring is associated with ethnic groups from Africa and Asia.


News Desk October 24, 2012

According to the Securities and Exchange Commission of Pakistan website, hawala (used interchangeably with hundi) is an alternative system that operates parallel to traditional banking channels.

It is distinguished from other remittance systems via trust and extensive use of connections such as family relationships or regional affiliations. Transfers of money take place based on communications between members of a network of hawaladars.

It works by transferring money without actually moving it, requires no bank accounts and is consummated without leaving a paper trail. This form of money transferring is associated with ethnic groups from Africa and Asia.

Published in The Express Tribune, October 24th, 2012.

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COMMENTS (7)

Lt Col Imtiaz Alam(retd) | 8 years ago | Reply @Cynical: Mr. Cynical , why don't give the people an Alternative. At least I suggested that the Banks whose branches are all over the World can take on this challenge.
Anony Mouse | 8 years ago | Reply

Some day these hawalders will discover Bitcoin.

Bitcoin is an online digital currency that works similar to cash but can be sent electronically over the Internet.

The difference between BItcoin and Hawala is that a Bitcoin money exchanger can operate indepedently.

A hawalder in the remittance destination country is of no use without a relationship with the hawalder partner in the sender's country. Also the two hawalders must trust each other as eventual settlement may not happen until a later time.

Bitcoin cuts any need for there to be a tie between the two sides.

It will not be long for current hawalders to figure out they can use bitcoin to do deals on their own. Bitcoins don't yet have much value for the beneficiary of a remittance transfer -- the recipient will likely be just looking for a way to convert the coins to the local fiat currency. But to an enterprising hawalder, acquiring and holding larger amounts of bitcoins becomes useful for paying for purchases made abroad or for sale to a local investor perhaps.

Also, a hawalder has lower costs than the formal, licensed money exchangers.

Compare the difference between Bitcoin and a Western Union.

A WU agent location needs lots of volume to pay for the overhead. But a Bitcoin-friendly hawalder or any other individual who provides a Bitcoin cash-out method can be profitable on every trade, even if only doing one or two exchanges per day.

It doesn't need to be a full time operation or need to start out as an intentional part-time gig even. There no doubt are individuals who have a little extra time and a little extra money that will do this exchange "as a favor" to be able to earn the 5% or 10% that doing such an exchange can bring.

And then word gets out and in the following weeks there are two recipients who need this favor. And then it is four, then eight, and pretty soon this individual now has this sideline business doing bitcoin cash-out service.

Also, then consider how basic business sense starts to take over. If I am offering a Bitcoin cash-out service to you, and you turn around and use that cash to pay for your mobile phone refill, then why don't I just start selling to you mobile phone refills for bitcoins, and earn the profit from that sale as well?

So essentially, there already exists entrepreneurial Bitcoin hawalders. It is every person and business who is willing to convert cash to bitcoins and vice-versa.

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