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Hawala moves money across borders without money ever crossing them

the gist

Hawala is an informal value transfer system that moves money between countries without physically shipping cash or using a bank transfer. A customer gives money to a broker, called a hawaladar, in one city, and a broker in another city pays the recipient from its own funds. The two brokers settle their balance later through trade, other transfers or netting, so the system needs only a minimum of two brokers and a network of trust. The name comes from the Arabic word ḥawāla, meaning transfer or trust, and the system originated in India as hundi, a bill of exchange. Hawaladars are concentrated in West Asia, North Africa, the Horn of Africa and the Indian subcontinent.

how it works

A sender pays a local broker and gets a code or confirmation. The receiving broker pays out cash to the recipient from its own holdings. Brokers keep running accounts with each other, so debts are offset over time and money rarely needs to move physically.

so what

Hawala has long supported migrant workers sending money home, and it works where formal banking is slow, expensive or unavailable. Governments treat it as a regulatory challenge because its transactions leave few formal records. The system shows how trust networks can move value at scale without a central institution.

Adapted from Wikipedia, the free encyclopedia · CC BY-SA 4.0

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