Date of Submission

Spring 2024

Academic Program

Economics

Project Advisor 1

Dimitri Papadimitriou

Abstract/Artist's Statement

This paper examines the hawala system, an informal money transfer mechanism that is deeply rooted in Afghan society and used globally. Although hawala has been criticized for potentially facilitating illegal transactions due to its anonymity, our research aims to provide a deeper insight into its historical significance, operational methods based on trust, and the challenges in its regulation by authorities such as the Da Afghanistan Bank (DAB). We differentiate between 'Hawala' and 'Sarafi' in the Afghanistan context and highlight hawala's critical role for those without formal banking services. The paper also looks into current regulatory strategies and underscores the importance of financial literacy programs for hawala operators to facilitate their transition into the formal financial system. Our conclusion advocates for policies that balance regulation with recognition of hawala's essential role in the Afghan economy, and we identify a gap in the literature, suggesting the need for more comprehensive research on the integration of informal financial practices into the broader economic framework.

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Open Access

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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