Hawala, an ancient global financial honor-system


10 Responses to “Hawala, an ancient global financial honor-system”

  1. Santa's Knee says:

    @Clif Marsiglio:

    “…and I know others that do this from family to family, but money brokers in any religion are only after one thing and they will do whatever it takes to keep that.”

    Upgrayedd don’t care what your religious persuasion is. Jew, Hindu, Raelian, Democrat – he will find a way to come get his money!

  2. nosida says:

    #3, Defaulting would given you a short term gain at the expense of long term income.

    It’s like stealing something from a your family when you are named on the will. There is the short term gain from the thing you stole but then the long term (greater) loss of the value of the stuff in the will, and don’t forget the social capital lost when one is disowned by the family.

  3. The Unusual Suspect says:

    So how is a dispute settled? If Broker Alice reports her records show a 3-unit debt from Broker Bob, but Broker Bob reports his records show only a 2-unit debt, how is the correct debt arrived at in the absence of debt instruments?

    In a fundamentalist culture, perhaps fear of damnation is enough to keep Alice and Bob both honest (or at least forgiving of each other’s discrepancies). But I would bet that what usually happens is that the broker with the biggest, meanest enforcers is the one who is always right.

  4. Adam Weiss says:

    That’s pretty interesting, but have you heard about what they’re doing with airtime?

    Fashioning prepaid airtime minutes as a form of digital currency is really fascinating…


  5. m1k3y says:

    this ‘unregulated market’ got a lot of attention post 9/11.. interestingly, it was all a load of bs
    (see the wikipedia section on 9/11)

    my limited understanding is that Hawala is also to do with Islamic rules on usury.. AFAIK, these banks charge no interest, just a flat fee!

    Proudhon would love these guys!

    @adam weiss – that airtime currency market is crazy.. way to go LeapFrog Nations!

  6. Super Nate says:

    There’s an attempt going on to recreate this system electronically with an open source standard.

  7. willie says:

    i’m willing to bet that cash and/or barter transactions are way older than hawala. how old is islam anyway?

  8. info4beingrich says:

    Hawala is an persian word basically which means ‘reference’. This system has been used since ages (even when the present system of governments was not present) to facilitate trade between states. The rules were strict in those times (and even now in most of the cases). Defaulters pay heavy penalties in some other form if not in cash. By the way barter is something different from this and is undoubtedly the oldest form known of trading things. Cash was a replacement for barter. Hawala is related to foreign exchange and paying at different locations..


  9. bob_calder says:

    The US had some parallel systems based on reputation and trust. Fax machines did really funky things to them because faxes are trust transfer devices.

  10. Clif Marsiglio says:

    From my friends who have used this system in the past, most have said the honor system is there because both a religious edict and the fact that until recently, these countries that used these were little more than loose collections of tribes and thus no law.

    Beyond that, there isn’t really a honor system any more than a loan shark. You may find this out physically, or your family may have to assume your debts. Lots of bad things could happen. The gov’ts stay out of the way to avoid this system from imploding and impeding their citizens from moving around the regions as they have done for thousands of years.

    From the religious aspect of this, I fully support the belief that one should help others in a honor system like this…and I know others that do this from family to family, but money brokers in any religion are only after one thing and they will do whatever it takes to keep that.

Leave a Reply