Informal Value Transfer Systems

Informal value transfer systems or underground banking systems are often better known as hawala, a remittance system that developed during the Abbasid caliphate (c. 750–945 c.e., 133–334 Hijra), centuries before the invention of free-market capitalism. Designed to lower the risks of commerce along the old Silk Road, hawala enabled trade by freeing merchants from having to carry large quantities of cash along the way. The word hawala is Arabic, meaning “bill of exchange” or “promissory note.” The Chinese used the term fei ch'ien to refer to informal value transfer systems; in Sanskrit, the term used is hundi, which means “truth” and “reference.” Hawala in many ways resembles the Jewish banking system prominent in medieval Europe, though upgraded to incorporate cell phones, computers, e-mail, and faxes. ...