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Before there was currency, which had Hawala, an informal exchange rate, which has been in existence since the days of the Silk Road when traders and financial have been using this system to barter and trade with other merchants in other countries. During that time the main global economic trade was along this route legend. This system evolved into what is known as hawala, which means "transfer" or "cable" in the Arab banking jargon. This type of system is used extensively in the Middle East, Africa and Asia. It's important mechanism that increased trade between Europe and Asia. Over time the system maturation in the banking system legitimate in some Asian countries, while in other areas that are still unregulated and until recently looked like a subway for channeling funds to terrorist activities.
Today, some hawala transactions are migrant workers from Asia (India and other Asian countries) that working in the oil-rich Middle Eastern countries such as UAE, Saudi Arabia, among others, and send money to their families. Since this system has been regulated, has been constant for centuries the traditions of their use continue among the people of this region. Why would anyone use this "insecure" system? The confidence, timeliness and cost effectiveness. Go to a bank to make a bank transfer can be time consuming and commissions are too high (to open an account and making cables 7-14 business days and commissions can be $ 30-50 per transaction that the hawala system, which can be done next business day an average of 5% commission of the amount transferred). But the biggest obstacles for banks and institutions are regulated by government mistrust between individuals. The hawala system has a network contacts / connections that these people depend on doing business. Friends and relatives who have used this network before recommending their friends to the same individuals in the hawala network. This is an attitude common in Asia and developing countries. Another reason why the hawala system is popular is because many governments to ban the development of movement of funds within or outside the country. The hawala system goes around the system without actually breaking the law. No equivalent exists outside India with similar systems. They go by names, such as Fei-Ch'ien, Huikuan, Chop, Chit oder Flying Money in China, paDala (Philippines), Hundi (India), Hui Kuan (Hong Kong), and Phei Kwan (Thailand). Find more on http://www.forexplane.com
Before this charge under fire, being transferred to the majority of funds were made by migrants who send money to their home countries to support families left behind, like transfers anonymous cash bank that provides services for Western Union. Hawala is not part of the currency system that we know today. Therefore, rates do not match the budgets legal currency, so the actual volume of the Forex is underestimated and unaccounted. There are agencies that monitor and control these activities. This decentralized system does it is impossible to precisely estimate the size of the daily operations, while in exchange, stocks, bonds and futures are centralized and controlled by an entity that performs actions more transparent.
There have been concerns that these black markets make up a large portion of the market currencies in general. Although it is difficult to speculate, the most liquid currencies are not in these countries, but less of the currency of the economic powers, such as the dollar U.S., British pound, euro, Japanese yen and Canadian dollar. These currencies make up the G8 (Canada, France, Germany, Italy, Japan, UK and U.S., Russia is a fee and not by their economic power). Click here for a chart: http://news.forexplane.com/Articles/Hawala/tabid/111/Default.aspx
These results of the forex trading business operations are estimated at $ 1.9 trillion per day, while retailers are a very small part of this market. As explained, the currency market is not only migrants sending money back home or to tourists to carry coins for change out their holidays abroad. According to David Krutz the Financial Times website (Published: 9 October 2006 20:48) "The foreign exchange market have doubled in size in just three years next year, thanks to increased participation by fund managers and pension funds. FX volumes, which rose from $ 1.770 billion than 2004 to $ 2.0 trillion last year, is expected to increase to 2.6 billion dollars this year and $ 3.6 trillion years following, as currency is accepted as an asset class in its own right according to TowerGroup.
Although the hawala and still others are part of the landscape, can not replace the greenback as it is today. Moreover, As more countries modernize and partnerships with technology advancing at a rapid pace, these systems will provide fewer services to migrants. But the threat the larger the anti-terrorist doctrine is being implemented by the West, pushing governments to control these territories in which these systems thrive to regulate their activities.
Any opinions, news, research, analysis, prices or other information contained in these articles are provided as general market information and does not constitute investment advice. Forexplane.com not accept responsibility for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.
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Brian Tran is an editor at ForexPlane.com, which is an online community for forex currency traders. Visit
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Article Source: ArticlesBase.com - Hawala In The Modern Forex World
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