Photo by Raffaele.

Romans didn’t believe in proxies, so there was hawala. The informal value transfer system became ubiquitous in South Asia because under Roman law, no one could conclude a binding contract on behalf of another. Instead, a convoluted set of contracts transferring rights and obligations had to be initiated for any exchange to take place. The Middle Ages came with the notion that the transfer of debt was permissible, largely a result of necessity. Long distance trade between Italian cities and the Muslim world at the time made commercial transactions much smoother, and European merchants could thank Islamic law’s facility with the idea of agency for that.

The hawala system employs brokers, or hawaladars. An expatriate worker would contact a hawala broker in his city (City A) and hand the hawaladar the amount of money he wants remitted to his home country. That hawaladar contacts his counterpart in the receiving country, who arranges payment in local currency to the remitter’s family, minus a commission. To ensure the money’s arrival, a password or numerical code is used, known only to the customer in City A, the hawala brokers, and the recipient. Once all is said and done, the first hawala broker owes the second. Repayment of the debt can take the form of goods, services, or a transaction going in the opposite direction and is premised entirely on the honor system. It helps that the broker system is often tied together by family relationships and regional affiliations. In the hawala system, there are no promissory notes, hawaladers can bypass official exchange rates, their commissions are much lower than those charged by banks, and money can be transferred from London to Kabul in 6 to 12 hours. If sender and recipient are in their respective hawaladars’ offices, the transaction can be instantaneous.

It is for these very reasons that the hawala system is so attractive to the narcotics industry in Afghanistan, the world’s largest producer of opium. During the growing months of February, March, and April, Kandahari hawaladars see little activity. However, from October through December, the poppy cultivation months, the hawala market sees a huge influx of funds reflecting advance payments to farmers for crop cultivation. And when the opium is ready for purchase, from April to June, the market experiences similarly large fluctuations. A high-end hawaladar might move $5 million USD in a busy month. Smaller brokers might move $1 million USD over the same period.

Further blurring the boundaries between licit and illicit use of hawala, international and domestic NGOs use the very same hawala system to provide essential humanitarian and developmental aid to Afghanistan. It is not uncommon for a hawaladar to see developmental aid head in one direction and, unknowingly, drug money in the other.