
Hawala - robbiet480
https://en.wikipedia.org/wiki/Hawala
======
nl
I _almost_ linked to this, too, in the "Western Union says Bitcoin is not
ready for international transfer" discussion[1].

The interesting thing about Hawala is that it provides a ready source of
liquidity in local currencies. If someone was to link the two (ie, a local
Hawala agent accepted a Bitcoin transfer from an _untrusted_ source, and then
moved the money via the trusted Hawala network) then almost all the problems
of Bitcoin would go away.

It would also set just about every TLA agency in the US looking at you (Semi-
anonymous crypto-currency which has been used in drug markets + untracable
Islamic money transfer network? There's a techno-thriller plot right there).
OTOH, Hawala agents seem to ignore US laws at the moment, so they might not
care about this either.

[1]
[https://news.ycombinator.com/item?id=6665635](https://news.ycombinator.com/item?id=6665635)

~~~
htmcer
Hawala and other informal networks are accounted for 40% of the remittances
sent every year.[1] USD 534 billion were sent in 2012 via formal networks.

Analyzing the remittances flow and their impact in the receiving countries
(often more in term of %GDP than official intl development aid), it's a shame
that the global average fee to "remit" is 9% and up to 12% while sending money
towards Sub-Saharan Africa. [2]

But that's a fast moving market with several technological and business model
innovations (and some YC startups too.

This last years, we have seen a lot of startups with interesting ideas based
on new technologies or new business model to improve the remittances market:
Azimo ([http://azimo.com](http://azimo.com)), Xoom
([https://www.xoom.com/](https://www.xoom.com/)), Regalii
([https://www.regalii.com/](https://www.regalii.com/) \- send good instead of
cash, YC), Transferwise ([http://transferwise.com](http://transferwise.com))
and new technology like mobile banking (M-Pesa, MTNMMO) and bitcoin
(buttercoin YC - [http://buttercoin.com/](http://buttercoin.com/)).

Disclaimer: I work on TawiPay ([http://tawipay.com](http://tawipay.com)) as a
side-project, a comparison website for remittances services.

[1] [http://www.scribd.com/doc/150342765/Trends-in-Remittances-
Ju...](http://www.scribd.com/doc/150342765/Trends-in-Remittances-
June-2013-The-Anthemis-Newsletter)

[2][https://remittanceprices.worldbank.org/sites/default/files/R...](https://remittanceprices.worldbank.org/sites/default/files/RemittancePriceWorldwide-
Analysis-Mar2013.pdf)

~~~
dobbsbob
Al Jazeera had a good story a while back about migrant workers in South Africa
being unable to send money home to Zimbabwe because of huge fees for small
amounts, and they have to have ID which costs their whole paycheck

~~~
htmcer
Yeah, South-Africa > Zimbawe is one of the most costly corridor in the world.
Starting at 20%...

------
diziet
One important thing to know is that in islamic banking, interest or anything
that exploits time value of money is considered usury, and is haraam (sinful).
There exists a whole institution of islamic banking compliant with shariah
law.

From gift giving for usage of money such as hibah to good will repayment of
debt such as qardul hassan where the debtor may repay more than the principal
amount, islamic banking seeks to avoid interest (riba).

~~~
wmf
It's hard for me to escape the feeling that Islamic banking replaces usury
with hypocrisy, but I guess high-context Cultures could probably make the same
argument in reverse.

~~~
mhb
For a real laugh, check out Shabbat elevators or the eruv:

[http://en.wikipedia.org/wiki/Shabbat_elevator](http://en.wikipedia.org/wiki/Shabbat_elevator)

[http://en.wikipedia.org/wiki/Eruv](http://en.wikipedia.org/wiki/Eruv)

~~~
bonobo
I don't think it's appropriate to make fun of somebody else's culture "for a
real laugh," but these links were interesting anyway. So, thank you.

~~~
notdrunkatall
It's perfectly appropriate, provided you're not Jewish.

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xerophtye
This system is commonly implemented in Pakistan by a Service called "Easy
Paisa" (translated: Easy Money). Where you can just deposit money at a
certified corner store with your National ID card and password. and then the
recipient can get it from their own corner store. The strength here is the
ubiquity of the service. it's everywhere! And when i say everywhere, i mean
even in rural areas! There ads actually build on the ability of the
breadwinner of the family, working in the city, to send money to his family
back in the village.

Recently, another major use is small businesses which operate as FB pages,
collect money from customers using this and then send the goods. Convenient
for both sides, as you avoid the hassle of depositing money in banks, or the
risk of a badly implemented Online Credit Card system.

------
srinivasanv
[http://www.treasury.gov/resource-center/terrorist-illicit-
fi...](http://www.treasury.gov/resource-center/terrorist-illicit-
finance/Documents/FinCEN-Hawala-rpt.pdf)

The first few pages are a very readable, understandable description of how the
system works in layman's terms. Recommended read.

------
cup
I work for quite a big Hawala system (www.bakaal.com.au) and were thinking
about implementing bitcoins. Moving through the legislation is the biggest
stumbling block.

~~~
lfmb
If you reach the bitcoin community, probably, you will find help. The
community is really friendly towards the spread of bitcoin use.

~~~
AsymetricCom
Deflationary pressures tend to do that. I wonder if they're motivated enough
to "stimulate the economy"

------
bane
I've heard this system compared to the old Renaissance Medici double entry
banking system. It's possible that Italian bankers learned about this system
and saw it as more secure than moving boxes of money and valuables around thus
establishing the foundations of modern banking.

[http://en.wikipedia.org/wiki/Medici_Bank](http://en.wikipedia.org/wiki/Medici_Bank)

It's also pretty much how Western Union works.

~~~
gwern
Yep! That was one of the realizations that dawned on me as I was writing that
article in 2006 and carefully reading through de Roover's description of how
the home Florence branch would transact with the foreign branches using drafts
and other instrument: "hey, this is just like hawala! They would spend each
other's money and occasionally balance the books with import/export deals."

------
marshray
I don't see how this is so different than our usual Western banking system,
except that it's less regulated and more customer-friendly.

~~~
nhaehnle
I have no idea why you were down-voted. I think you're right.

For example: The Wikipedia article claims that the Hawala system is unusual in
that no promissory notes are exchanged. However, directly after that, the
article explains how extensive notes are kept on how much the brokers owe each
other, and that there are some forms of final settlement between brokers.
These notes on mutual indebtedness appear to play an identical role to
promissory notes.

This is really no different than the final settlement between banks in the
Western system, except that - as you wrote - it appears to be less regulated.

------
jitendrac
In india it is used extensively and very often, we some times call them
"Aangadiya" they transfers the money for very little cost ex. i have sent 25K
INR with only 50rs extra as charge, which is basically 0.2 percent. And its
accuracy and speed is amazing.

------
chintan
"The word angadia means courier in Hindi, but also designates those who act as
hawaladars within India. These people mostly act as a parallel banking system
for businessmen. They charge a commission of around 0.2–0.5% per transaction
from transferring money from one city to another."

<= Wow I remember as kid, going to an "Angadia" office with my dad to transfer
money. Didn't understand any of it back then.

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miguelrochefort
So it's pretty much like Ripple.

[http://ripple.com](http://ripple.com)

~~~
maaku
It's more like the original Ripple concept:

[https://classic.ripplepay.com/](https://classic.ripplepay.com/)

~~~
miguelrochefort
Has the concept really changed since then?

[https://ripple.com/how-ripple-works/](https://ripple.com/how-ripple-works/)

As far as I know, Ripple still works the same way as it did then.

------
cbsmith
Note that Hawala is really not _that_ different from Western Union:
[http://scholarlycommons.law.northwestern.edu/cgi/viewcontent...](http://scholarlycommons.law.northwestern.edu/cgi/viewcontent.cgi?article=1653&context=njilb)

------
micheljansen
Transferwise operates a very similar model for currency exchange: you send
them Dollars to convert to Euros and they match you to people who need the
opposite. I guess their model is a bit different in that the exchange only
happens once a second party is found, but I think a peer to peer system makes
even more sense when converting between currencies, as there is literally no
way to turn actual Pound Sterling into Euros, so physical transfer is out of
the question.

------
mleonhard
I'm working on an RFC for an Internet protocol that works like Hawala:
[https://github.com/mleonhard/hipp](https://github.com/mleonhard/hipp)

~~~
maaku
Have you heard of the Ripple 2-phase commit protocol?

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makmanalp
Interestingly, the word for wire transfer in Turkish is "havale", which I
imagine is borrowed from this.

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pknerd
Guess West just learnt about it despite of Asians have been using this to
transfer money back to home.

------
jpeg_hero
I've always thought Dwolla was named after this. No?

------
robbiet480
Unrelated side note: I posted this but my Android app gave an error so I
thought it didn't. I only found this by the @newsyc50 account on Twitter.

------
obilgic
This is what bitcoin is great for and will be used for. Medium for transfering
the purchasing power, not for storing it.

~~~
maaku
Actually, bitcoin as scarce money is pretty much as directly opposed to this
as you can get. If you want to make a digital currency comparison it's more
like Ripple's trust networks (minus the XRP).

------
AsymetricCom
>After the September 11, the American government suspected that some hawala
brokers may have helped terrorist organizations [...] since confirmed that the
bulk of the funds used to finance the assault were not sent through the hawala
system, but rather by an official inter-bank wire transfer to a SunTrust Bank
in Florida, where two of the conspirators had opened a personal account.

>However as a result of intense pressure from the U.S. authorities, widespread
efforts are currently being made to introduce systematic anti-money laundering
initiatives on a global scale, to better curb the activities of the financiers
of terrorism and those engaged in laundering the profits of drug smuggling.

The interesting thing about this line of logical failure is the possibility
that a Hawala wouldn't work to transfer funds to terrorists, they had to use a
de-personalized banking system that doesn't really care what they're doing
with the money, unlike the Hawala system where the agents have to consider the
impact of their actions on their network/family.

Of course, such a logical failure that just happens to further secure the
power of established banks against other systems, "logical failure" is a
generous judgement of what was going on.

------
kimonos
Very interesting! I find it very helpful to know the different cultures of the
world.

------
wikih8
why do people post wikipedia articles as news?

~~~
dylz
Why do you hate wiki? Many people don't know this exists, it's interesting and
disruptive. This could be a great startup idea too.

~~~
endgame
It's not that it's uninteresting. It's that it's posted without context or
commentary.

