Hawala

AAA

DEFINITION of 'Hawala '

An alternative remittance channel that exists outside of traditional banking systems. Hawala is a method of transferring money without any actual movement. One definition from Interpol is that Hawala is "money transfer without money movement." Transactions between Hawala brokers are done without promissory notes because the system is heavily based on trust.


BREAKING DOWN 'Hawala '

Hawaladars, or Hawala dealers, arrange money transfers that are often backed only by trust, family connections or regional relationships. Hawala originated in South Asia during ancient times, and is used throughout the world today, particularly in the Islamic community as an alternative means of conducting funds transfers. Hawala is frequently referred to as underground banking, which is a misnomer because Hawala services often operate openly and legitimately.

RELATED TERMS
  1. Remittance

    The term most commonly refers to money being sent via mail or ...
  2. Bank Reserve

    Bank reserves are the currency deposits which are not lent out ...
  3. Dual Banking System

    The system of banking that exists in the United States in which ...
  4. Bank

    A financial institution licensed as a receiver of deposits. There ...
  5. Transfer Payment

    1. In the United States, a payment made to individuals by the ...
  6. Trade Credit

    An agreement where a customer can purchase goods on account (without ...
Related Articles
  1. Home & Auto

    From Booms To Bailouts: The Banking Crisis Of The 1980s

    The economic environment of the late 1970s and early 1980s created the perfect storm for a banking crisis.
  2. Credit & Loans

    The Evolution Of Banking

    Banks are a part of ancient history. Find out how this system of money management developed into what we know today.
  3. Forex Education

    The International Money Market

    Banks, corporations, traders and speculators all use the IMM to borrow, lend, trade, profit, finance, speculate and hedge risks.
  4. Options & Futures

    The Chinese Wall Protects Against Conflicts Of Interest

    After the crash of 1929, this barrier helped define ethical limits, but it did little to prevent fraud.
  5. Mutual Funds & ETFs

    Top 3 Switzerland ETFs

    Explore detailed analysis and information of the top three Swiss exchange-traded funds that offer exposure to the Swiss equities market.
  6. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
  7. Investing Basics

    Explaining Trade Liberalization

    Trade liberalization is the process of removing or reducing obstacles that impede the exchange of goods and services between nations.
  8. Investing Basics

    What's a Price-Taker?

    Price-taker is an economic term describing a market participant who has no effect on overall market activity.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI South Africa

    Learn more about the iShares MSCI South Africa fund, which is an NYSE-listed exchange-traded fund offered and managed by BlackRock.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI EAFE Small-Cap

    Read an in-depth analysis of the iShares MSCI EAFE Small-Cap Fund, a well-managed exchange-traded fund that tracks small-cap international stocks.
RELATED FAQS
  1. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  2. What are the differences between B-shares and H-shares traded on Chinese stock exchanges?

    Equity listings in China generally fall under three primary categories: A shares, B shares and H shares. B shares represent ... Read Full Answer >>
  3. What are the differences between H-shares and A-shares on Chinese and Hong Kong stock ...

    Publicly trade companies in China generally fall under three share categories: A shares, B shares and H-shares. A-shares ... Read Full Answer >>
  4. What is the benefit of the Modified Internal Rate Of Return (MIRR)?

    The modified internal rate of return (MIRR) is a financing metric used in business capital budgeting. Its primary benefit ... Read Full Answer >>
  5. Why is the Modified Internal Rate Of Return (MIRR) preferable to the regular internal ...

    Even though the internal rate of return metric is popular among business managers, it tends to overstate the profitability ... Read Full Answer >>
  6. Why are financial markets considered to be transparent?

    Financial markets are considered transparent due to the fact it is believed all relevant information is freely available ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!