Hawala: transferring money without actually moving it

http://en.wikipedia.org/wiki/Hawala

by Rod • 17 years ago

58 19 17 years ago

en.wikipedia.org

I don't know a lot about macroeconomics and this is a little off topic but isn't the honour system principle what nations work with and how trade deficits etc. emerge?

chime• 17 years ago

Yeah, Hawala is pretty much like distributed clearing houses. Most small businesses in India that I know use some form of Hawala (or Angadia).

patio11• 17 years ago

This is essentially identical to what happens when I put cash in the ATM at 7-11 with instructions to wire with my local bank to a bank in Tokyo which wires it to a bank in Washington which wires it to Bank of America in St. Louis so that I can move it into my IRA.

The yen doesn't physically get shipped to America, either.

plinkplonk• 17 years ago

"The yen doesn't physically get shipped to America, either."

yeah I don't get the "without moving it" part either. With minor exceptions money doesn't physically move in the mainstream financial system either. There are many things that define hawala but "transfering money without moving it" isn't one.

keopi2• 17 years ago

It's good to know not all banking institutions were destroyed :P

In seriousness, I wonder how much the credit crisis affected Hawala.

kailashbadu• 17 years ago

I don’t see how credit crisis affect would affect the system other than that people have less money to send around.

keopi2• 17 years ago

exactly. However, I was thinking more that has the credit crisis affected enough individuals for it to affect this system as well. Meaning, do less people use this now than before? It also makes me wonder, do some people trust this system more than the well established one that most people use?

csomar• 17 years ago

I'm arabic and I can read this word!

In Tunisia, they offer this service in the Mailling System. You deposit money to the nearest office and a fee of 1.5 DT (around $1) and you mention the person to get it (with a code).

The other person also should go to the nearest office and can get the money using his identity card and the code.

It made things easier, as here people can't easily get Credit Cards.

abdulhaq2• 17 years ago

Hawala is based on the islamic financial system which does not allow lending with interest, instead the lender must participate in the risk of the business, taking his share of profit or loss. Under a form of hawala it was possible to take a cheque from Morocco and have it cashed in China, long before such a system was available in the West.

andr• 17 years ago

Yeah, hawala evolved into giros (or postal transfers) in most of the western world.

vamsee• 17 years ago

At least in India, most forms of Hawala are illegal, as the money easily escapes the tax net and can be quite helpful in transferring black money. But that doesn't stop the practice from being quite rampant, and from what I know from a friend, a surprisingly dependable way of transfer, in fact.

g__g• 17 years ago

The word is quite common in India. Here's a summary: Hawala transfers are mostly done by the underworld people (read gangsters, mafia, mob etc.) The most common application of hawala is in betting. In India, betting on sports is illegal but there is a huge underground network that takes bets on sporting fixtures(cricket being the fav.). To place a bet you have to know someone who knows a bookie, you speak to the bookie, ask him what the going rates are and place your bets without paying any initial money. If you lose you will be told where to deliver the money, usually it'll be to an agent in your city. After this agent has collected money from all losing parties, he is informed of all the people who won their bets in that city, he then transfers the same money to them, the difference between the two is the profit. This is just one application. Here hawala is mostly organized money laundering, reading the above comments I am surprised to see legal systems of practicing hawala.

known3• 17 years ago

India's Prime-Minister-In-Waiting, Advani is accused in Hawala scam. http://en.wikipedia.org/wiki/Hawala_scandal

FraaJad• 17 years ago

That must some good crystal you are staring into..

The election started only 2 days back and will go on till may 13.

Advani is a PM aspirant, not a PM-in-waiting.

known3• 17 years ago

http://www.rediff.com/news/2006/dec/10advani.htm

known3• 17 years ago

Hawala flourishes in India because 85% of Indians do NOT have bank accounts. http://tinyurl.com/cj25dz

ahoyhere• 17 years ago

Most of us know this service as Western Union (and their ilk).

Interesting historical basis, though.

Hawala: transferring money without actually moving it

Related Stories