Hawala traders are being squeezed by regulators and covid-19
PACKED TRADING floors are rare these days. An exception is the Shahzada currency-exchange market in Kabul. Seven days a week hundreds of men crowd into a modest courtyard. Each has a bundle of banknotes; some have piles several feet deep. Prices—for American dollars, Iranian rials and Pakistani rupees—ring out and deals are done, on the spot, in cash. In the small offices around the sides, money that is changed can then be transferred to almost anywhere in the world. Cash is handed over and WhatsApp messages fly.
The money travels by hawala (from the Arabic for “transfer”), a centuries-old system. Transactions in opposite directions are matched against each other through a network of personal contacts. An Afghan in London sending remittances home might in turn finance a Kabuli merchant importing Chinese goods purchased in Britain. Banks may be used—but not formally. The sender is given a serial number, which they send (these days on WhatsApp) to the recipient, who then picks up the money from a contact of the hawala merchant.
Hawala is the core of Afghanistan’s financial system. One in six adult Afghans has a bank account; there are just two branches for every 100,000. Most remittances—which some estimates reckon amount to 15-18% of the country’s...