How Hawala Works.

This is a Guest Post by <Anonymous> who recently tagged
along with his friend who was receiving money via Hawala.

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Hawala is a method of transferring money without any money actually moving. It is an alternative remittance channel that exists outside of traditional banking systems. It is simple, elegant and highly efficient - which is probably why many citizens (who are otherwise law abiding) use it. Governments hate it because Hawala money funds illegal activities. Banks hate it because they lose their transaction fees.

I've heard about Hawala all my life but never thought i'd witness one as it happened. So i jumped at the opportunity to get some first-hand knowledge when a friend told me he was supposed to receive some Hawala money.

Here's how it works.

  1. Dubai: Your Dubai Uncle calls you. “Hey, I’m sending some money home. Send me a ‘token’ ”.
  2. Hyderabad: You snap a picture of a ten-rupee-banknote (token) and WhatsApp it to your Uncle.
  3. Dubai: Your Uncle visits Hawala-Guy-Dubai, hands him AED 50,000, forwards the ten-rupee-banknote picture, and gives him your contact number.
  4. Dubai: Hawala-Guy-Dubai contacts Hawala-Guy-Hyderabad, mentions the amount to be delivered, the handling fee, and forwards the ten-rupee-banknote picture and your contact number.
  5. Hyderabad: Hawala-Guy-Hyderabad calls you and arranges a meeting point. You go there and give him the physical ten-rupee-banknote. He verifies the note with the picture he has in WhatsApp. You get your equivalent money in INR (minus the low handling fee - in this case it was 2%). Everything is settled within 24 hours.
  6. Balancing Books: Hawala-Guy-Dubai and Hawala-Guy-Hyderabad settle their balances (because there’s money going the reverse route also).

Hawala is an honor system. Things are done on trust/handshakes. If you cheat you are branded for life. No one will ever do any kind of business with you or your family (That’s what Hawala-Guy-Hyderabad tells me).

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