Archive for November 7th, 2013

November 7, 2013

Hawala

hawala

Hawala [ha-wah-lah] (Arabic: ‘transfer’) is an informal value transfer system based on the performance and honor of a huge network of money brokers, primarily located in the Middle East, North Africa, the Horn of Africa, and the Indian subcontinent, operating outside of, or parallel to, traditional banking, financial channels, and remittance systems.

The system is believed to have arisen in the financing of long-distance trade around the emerging capital trade centers in the early medieval period. In South Asia, it appears to have developed into a fully-fledged money market instrument, which was only gradually replaced by the instruments of the formal banking system in the first half of the 20th century. Today, hawala is probably used mostly for migrant workers’ remittances to their countries of origin.

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