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Summary of hawala system
- 5. introduction History Its leagal or illegal
- 6. introduction What is hwala system? The word "Hawala" means trust. which works outside the circle of banks and formal financial systems. It is also sometimes referred to as “Underground Banking”. "Hawala" consists of transferring money (usually across borders and in order to avoid taxes or the need to bribe officials) without physical or electronic transfer of funds
- 7. History of hawala the Indian sub-continent for use in trade and credit transactions. Hundis are used as a form of remittance instrument to transfer money from place to placeas a form of credit instrument or IOU to borrow money and as a bill of exchange in trade transactions. The Reserve Bank of India describes the Hundi as "an unconditional order in writing made by a person directing another to pay a certain sum of money to a person named in the order.
- 9. Its legale or ilegale Yes, Hawala has been made illegal in many countries, as it is seen to be a form of money laundering and can be used to move wealth anonymously. Why illegal? As hawala transactions are not routed through banks they cannot be regulated by the government agencies and have thus emerged as a major cause of concern. This network is being used extensively across the globe to circulate black money and to provide funds for terrorism.
- 11. How Hawala works? Hawala works by transferring money without actually moving it. In a hawala transacIn the most basic variant of the hawala system, money is transferred via a network of hawala brokers, or hawaladarstion. There are more than 200 Islamic banks in the USA alone and many thousands in Europe, North and South Africa, Saudi Arabia and pakistan.
- 12. Role of the hawala system in the economic development of Pakistan The hawala system can exist outside of the traditional legal system it based on long trem trust in mutul fund.it have negative efect on the development of the economy as its transfer of money with out any legale channels such as banks ,post offices and EC’s etc. Pakistani policy maker are strongly criticize the hawala system as dangerous because transactions are extremely private,and no advantage to economy such as no paying any tex and other marginal costs on currences.
- 13. Cont... As its illegale this type of transfer of money can be used by terriorist of luondering money that is high disadvantege of it as in pakistan now day war on terrior been going on so we have need of implement rule for hawala system to minimize this kind of activity. In hawala system we concern with individual money not comulativaly thats why its do not any help in devlopment. Its have no tax on it.
- 14. Cont.... Advantage if we make hawala system legal such that remittance will be boost our economy.
- 15. Illegal econmy in the region of pakistan Pakistan is uniquely challenged by the nexus between crime and the illegal economy due to its geographic location as our relation with nighbours as Afghanistan complicated by croos boder crimnalty which allow sumgling and other activities that can informal and formal organized criminal networks of supplier rings, wholesalers, financiers, protectors and patrons. The proceeds of illegal and criminal economic activities, in proportion to GDP, appear to be generally higher in developing countries. Pakistan’s GDP was approximately US $169.6 billioin 2009/10.In 2003, the size of the informal economy was estimated at 30 percent of the GDP. The State Bank of Pakistan (SBP) suggests that this had droppedto below 20 percentby 2008. This SBP estimate means that Pakistan’s informal economy was approximately US $34 billion in 2009/10 as 4.2% in GDP of pakistan.
- 16. Settlements of accounts in hawala system Cash recive with any physical transfer: e.g Fareed U.S. resident of Pakistan descent wishes to send money to his family in Pakistan.' Fareed then approaches Khalid,a hawaladar,or money remitter,inthe United States who has acounter part in Pakistan,Nawaz. Both Khalid and Nawaz own jewelry stores.and hwaldar as side business freed gave him mony to send it and some commesion.so Khalid cal nawaz to pay to fareed family at pakistan and contact fareed family via email or sent message and send the asociated code with transction get money from nawaz and minus comesion.
- 19. criminal •Who donot want to show his income source Financial comp •Who do not want to pay any tex while transpering money Commercial bank •Some time comecial bank want to invest black money such offshore banks Terorrest fiancing
- 20. Hawala agenceis
- 21. Hawal use as promissory notes
- 25. Italy was the first country in the world to enact a law to protect remittances in 1901. while Spain was the first country to sign an international treaty (with Argentina in 1960) to lower the cost of the remittances received. Since 2000, remittances have increased sharply worldwide, having almost tripled to $529 billion in 2012. In 2012, migrants from India and China alone sent more than $130 billion to their home countries. In September 2008, the World Bank established the first international database of remittance prices.
- 26. kistan Remttance or transfer of money cam on the official chanels like banks EC’s and pakistan post offices .if its came on unofficial chanels then its illegale such like hawala and money cam through hands. In November 2008 Munaf Kalia (Chief Executive Officer of Khanani and Kalia International (Pvt.) Ltd.), Yusuf Kalia, and associates, were charged for illegally transferring funds from Pakistan to Afghanistan. Pakistan is now try to compansate legal transfer of money by minimizing the cost of its transfer compare to illegal transfermation.
- 29. SA 28% UAE remittance USA 22% 17% UK 12% GCC 11% other 10% SA UAE USA UK GCC other
- 31. Bank:Are the market player in remittance 5 big banks in pakstan such like UBL, NBP,HBL,MCB,ABL are providing services in remittance market. Exchange companies:these companies are enforced in 2002 to bring exchange and reittance bussines under proper financial decipline.these transfer are online and proper ducumented.zeroc exchange partener with Wester union,wall street exchanges, Post offices:pakistan have post offics over 13419 all over pakistan thy are providing the services of remitance too.
- 32. 2000000 3000000 2000000 5000000 Rimittance inflow in pakistan 10000000 3000000 3000000 2000000 0 8000000 9000000 28000000 32000000 33000000 42000000 45000000 40000000 35000000 30000000 25000000 20000000 15000000 10000000 5000000 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
- 33. Pakistan Workers remittances and compensation of employees .The value for Personal remittances, paid (current US$) in Pakistan was 28b as of 2011. As the graph shows, over the past 13 years this indicator reached a maximum value of $42b in 2014 and a minimum value of $0.00 in 2008. Pakistan the 1980s appeared to be the golden period when around half of the remittances inflowto South Asia was received as compared to 12 percentin 2009.The foreign remittances to Pakistan according to official data declined from US$ 1467 million in 1991 to US$1086 million in 2000/01 butsubsequentlythe remittance registered a large increase to US$ 5.6 billion in 2008- 09.
- 34. In 2014 our remiiance was 6.5 billion Wich was 9% of gdp and in Q3 of 2014 it have 9.3 % transfer cost. Our rermittance is equale to our export. T.C Column1 100 80 60 40 20 0 90.7 91 9.3 9 100 transfer cost GDP i pak economy 42 billion 100 T.C Column1
- 35. the hawala system It is less expensive, swifter, more reliable, more convenient, and less bureaucratic than the formal financial sector. And remittance is full confidencial and their is no fraude but in the hawala system their is high risk at low cost her in the Remttance high cost but no risk of damaging of your transfermation. so what do you prefer is your own decsion.
- 36. Padala (Philpine) Fei-chain H&R (China) Hunidi (India) Pei kawan (thieland) Hui kuan (HongKong)
- 38. The methodology of analyzing Most of the remittance we analysis for individual instead of analyzing agregative flows of remittance. We have to make these kind of instiute that they can estimate the remitance and make investment plane for them. One aspect is its potential impact on the monetary accounts of countries on either end of the hawala transaction. Because these transactions are not reflected in official statistics, the remittance of funds from one country to another is not recorded as an increase in the recipient country's foreign assets or in the remitting country's liabilities, unlike funds transferred through the formal sector. As a consequence, value changes hands, but broad money is unaltered. However, hawala transactions may affect the composition of broad money in a recipient country.
- 40. Books 1. Remittances in Pakistan: Why Have They Gone Up, and Why Aren't They Coming Down By Udo Kock, Yan Sun Migrant Labor Remittances in South Asia By Samuel Munzele Maimbo, Richard Adams, Nikos Passas, Reena Aggarwal Iamges from google
Editor's Notes
- Why hawala developed In earlier times, IFT systems were used for trade financing. They were created because of the dangers of traveling with gold and other forms of payment on routes beset with bandits. Local systems were widely used in China and other parts of East Asia and continue to be in use there. They go under various names—Fei-Ch'ien (China), Padala (Philippines), Hundi (India), Hui Kuan (Hong Kong), and Phei Kwan (Thailand). The hawala (or hundi) system now enjoys widespread use but is historically associated with South Asia and the Middle East. At present, its primary users are members of expatriate communities who migrated to Europe, the Persian Gulf region, and North America and send remittances to their relatives on the Indian subcontinent, East Asia, Africa, Eastern Europe, and elsewhere. These emigrant workers have reinvigorated the system's role and importance. While hawala is used for the legitimate transfer of funds, its anonymity and minimal documentation have also made it vulnerable to abuse by individuals and groups transferring funds to finance illegal activities. Economic and cultural factors explain the attractiveness of the hawala system. It is less expensive, swifter, more reliable, more convenient, and less bureaucratic than the formal financial sector. Hawaldars charge fees or sometimes use the exchange rate spread to generate income. The fees charged by hawaladars on the transfer of funds are lower than those charged by banks and other remitting companies, thanks mainly to minimal overhead expenses and the absence of regulatory costs to the hawaladars, who often operate other small businesses. To encourage foreign exchange transfers through their system, hawaladars sometimes exempt expatriates from paying fees. In contrast, they reportedly charge higher fees to those who use the system to avoid exchange, capital, or administrative controls. These higher fees often cover all the expenses of the hawaladars. The system is swifter than formal financial transfer systems partly because of the lack of bureaucracy and the simplicity of its operating mechanism; instructions are given to correspondents by phone, facsimile, or e-mail; and funds are often delivered door to door within 24 hours by a correspondent who has quick access to villages even in remote areas. The minimal documentation and accounting requirements, the simple management, and the lack of bureaucratic procedures help reduce the time needed for transfer operations.