Front Matter

Front Matter

Mohammed El Qorchi, Samuel Maimbo, and John Wilson
Published Date:
August 2003
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© 2003 International Monetary Fund

Production: IMF Multimedia Services Division

Typesetting: Julio R. Prego

Figures: Martina Vortmeyer

Cataloging-in-Publication Data

El Qorchi, Mohammed.

Informal funds transfer systems: an analysis of the Hawala system / Mohammed El Qorchi, Samuel Munzele Maimbo, and John F. Wilson—Washington, D.C.: International Monetary Fund, 2003.

  • p. cm.—(Occasional paper, ISSN 0251-6365; 222)
  • A Joint IMF-World Bank paper.

Includes bibliographical references.

ISBN 1-58906-226-4

1. Hawala system. I. Maimbo, Samuel Munzele. II. Wilson, John F. III. International Monetary Fund. IV. World Bank. V. Occasional paper (International Monetary Fund); no. 222

HG177.7.E46 2003

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The following symbols have been used throughout this paper:

  • … to indicate that data are not available;
  • — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;
  • – between years or months (e.g., 2000–01 or January–June) to indicate the years or months covered, including the beginning and ending years or months;
  • / between years (e.g., 2000/01) to indicate a fiscal (financial) year.
  • “Billion” means a thousand million.

Minor discrepancies between constituent figures and totals are due to rounding.

The term “country,” as used in this paper, does not in all cases refer to a territorial entity that is a state as understood by international law and practice; the term also covers some territorial entities that are not states, but for which statistical data are maintained and provided internationally on a separate and independent basis.


This joint IMF–World Bank paper is a timely contribution to the ongoing debate about the operations, benefits, and risks of the informal hawala system. In a debate heightened by the events of September 11, 2001, the authors provide a comprehensive review of the system’s historical development, the operational characteristics that popularize its use, and the national and international economic and regulatory challenges it poses.

While drawing attention to the legitimate uses of the informal hawala system, such as the transfer of migrant labor remittances and humanitarian, emergency, and relief aid to regions where financial systems are either absent or weak, the authors acknowledge the system’s vulnerability to criminal activities. They argue that the benefits of speed, low cost, convenience, and potential anonymity associated with the informal hawala system can also attract individuals and groups keen to circumvent existing regulations. The authors rightly conclude that addressing the concerns raised by the informal funds transfer systems will require simultaneous improvements in the formal financial sector. In addition to exchange controls, high transaction costs and long delays in effecting money remittances through the formal sector provide major incentives for the existence of the informal funds transfer systems. Thus, an important conclusion of the paper is the need to tackle deficiencies and enhance competitiveness in the formal funds transfer systems.

The authors highlight the complexity of the regulatory issues posed by the informal funds transfer systems and the variety of approaches adopted by different countries. This is an important contribution to our work on enhancing the integrity of the international financial system—a goal to which both the International Monetary Fund and the World Bank are jointly committed.

I very much welcome the sharing of the authors’ description of the challenges, findings, and recommendations with a broader audience. I also hope the pragmatic approach of the authors would contribute to developing a better understanding of these systems and enrich the debate among interested parties.

Eduardo Aninat

Deputy Managing Director

International Monetary Fund


This paper was prepared by an International Monetary Fund-World Bank staff team comprising Mohammed El Qorchi (IMF, Monetary and Financial Systems Department, head of the team), Samuel Munzele Maimbo (World Bank), and John F. Wilson (IMF, Middle Eastern Department). The research team members visited Germany (Bonn), Pakistan (Karachi), the Philippines (Manila), Saudi Arabia (Riyadh), the United Arab Emirates (Abu Dhabi and Dubai), and the United Kingdom (London). On return, team members continued their discussions with the relevant parties. Later, some team members visited Afghanistan (Kabul, Herat, and Jalalabad) and participated in international conferences on informal remittance systems in Abu Dhabi (May 2002), Oaxaca (September 2002), and London (January 2003), among others.

The authors note that the paper benefited from the review and comments of many colleagues, including Stefan Ingves, V. Sundararajan, Barry Johnston, Tomás Baliño, Patricia Brenner, Zubair Iqbal, Peter Stella (all IMF); Cesare Calari, Marilou Uy, Margery Waxman, Joseph Del Mar Pernia, Simon Bell, Ismail Radwan (all World Bank); and Professor Nikos Passas. The authors also wish to thank Eduardo Aninat, Jeffrey Goldstein, Executive Directors, and staff of several IMF and World Bank departments for their insightful comments and suggestions. The authors are indebted to Steven Kennedy, Natalie Baumer, Oriana Bolvaran, Margarita Aguilar, Mary Wilson, Tsegereda Mulatu, Sarah Guymont, and Baerbel Bernhardt for their assistance and to Archana Kumar of IMF’s External Relations Department for editing the Occasional Paper and coordinating its production.

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