ManagementParadise.com : Worlds Leading Management Portal. MBA | Classroom, Boardroom and Beyond


Go Back   ManagementParadise.com Forums - Your MBA Online Degree Program and Management Students Forum for MBA,BMS, MMS, BMM, BBA, students & aspirants. > Projects HUB for Management Students ( MBA Projects and dissertations / BMS Projects / BBA Projects > Resolve Your Query - Get Help and discuss Projects > Financial Management ( FM )

ECONOMIC IMPACT OF HAWALA

ECONOMIC IMPACT OF HAWALA

Discuss ECONOMIC IMPACT OF HAWALA within the Financial Management ( FM ) forums, part of the Resolve Your Query - Get Help and discuss Projects category; ECONOMIC IMPACT OF HAWALA Despite its informality, the hawala system has direct and indirect macro-economic implications— for financial activity as ...

Reply

 

LinkBack Thread Tools Display Modes
Advertisements
ECONOMIC IMPACT OF HAWALA
Old
 (1 (permalink))
Sunanda K. Chavan
sunandaC has a spectacular aura aboutsunandaC has a spectacular aura aboutsunandaC has a spectacular aura about
 
sunandaC
Management Paradise Guru
 
Status: Offline
Posts: 6,685
Join Date: Jul 2010
ECONOMIC IMPACT OF HAWALA - October 11th, 2010

ECONOMIC IMPACT OF HAWALA


Despite its informality, the hawala system has direct and indirect macro-economic implications— for financial activity as well as for fiscal performance.
One aspect is its potential impact on the monetary accounts of countries on either end of the hawala transaction.

Because these transactions are not reflected in official statistics, the remittance of funds from one country to another is not recorded as an increase in the recipient country's foreign assets or in the remitting country's liabilities, unlike funds transferred through the formal sector. As a consequence, value changes hands, but broad money is unaltered. However, hawala transactions may affect the composition of broad money in a recipient country.

In the remittance business, such transactions are conducted mainly in cash, even though hawaladars may use the banking system for other purposes. Individuals from developing countries who transfer funds abroad through the hawala system for investment or other purposes are usually members of wealthy groups.

They supply local hawaladars with cash by making withdrawals from their bank accounts. As a consequence, hawala-type transactions tend to increase the amount of cash in circulation.


Furthermore, IFT (Informal funds transfer) systems have fiscal implications for both remitting and receiving countries because no direct or indirect tax is paid on hawala transactions.

The negative impact on government revenue applies equally to both legitimate and illegitimate activities that involve the hawala system.


Hawala transactions cannot be reliably quantified because records are virtually inaccessible, especially for statistical or balance of payments purposes. This holds true for both the remitting and, especially, the receiving sides of the transactions.

Hawala transactions from developing countries are sometimes driven by capital flight motivations; they may also be driven by a desire to circumvent exchange control regulations and the like, leaving no traceable records.

Nevertheless, the authorities of some countries have sporadically made estimates of hawala activity based on their expatriate populations and balance of payments data.

In any case, all crude estimates should take into account both hawala and reverse hawala transactions (see box) as well as transactions driven by illicit activities.

Although it would be impossible to provide a precise figure, the amounts involved in hawala transactions are likely to entail billions of dollars.

Regarding the economic impact of hawala, above all, there are two aspects.

1. One is the macroeconomic effect it has on individual economies and state sovereignty.

For example, according to Pakistan estimates amounts reaching the equivalent of billions of US dollars are channeled past the country's tax authorities in this way every year. In India, there are estimates that, although forbidden, up to 50 % of the economy uses the hawala system for moving funds.

2. Another aspect is the impact on international financial markets, financial regulation and monetary policy. In principle, informal money transfer systems tend to reduce the effectiveness of traditional instruments of monetary policy in making it more difficult to judge the need for money balances in an economy and the reactions to changes in rates and prices.

Beside, they hamper the supervision of money and capital flows and the fight against risky or illegal financial practices. This is the reason why, for example, the Financial Action Task Force (FATF) and the Asia/Pacific Group on Money Laundering (APG) pay close attention to the system.

On the other hand, there are two aspects which help to put in perspective the importance of hawala:

1. First, with an estimated annual volume of $200bn it is a rather minor phenomenon amid the vast amounts of cash flowing through the global markets each day.

For instance, average daily turnover in traditional foreign exchange markets world-wide is estimated at $1,210bn. Annual transaction values in the US CHIPS and Fedwire payment systems, the British CHAPS or the German EAF reach up to hundreds of trillion dollars.

2. Second considering the intranets used by large multinational firms operating world-wide, hawala is only one among many informal payment systems bypassing traditional banks.
Advertisements
Friends: (0)
Reply With Quote
Related to ECONOMIC IMPACT OF HAWALA
 

Similar Threads

Thread Thread Starter Forum Replies Last Post
HOW DOES HAWALA WORK? Sunanda K. Chavan Financial Management ( FM ) 0 October 11th, 2010 03:18 PM
Impact of Economic Issues on Advertising Sunanda K. Chavan Introduction to Advertising 2 September 3rd, 2010 12:30 PM
Need a project report on impact of new economic policy on retail sector Rohit Chawla Economics 2 July 12th, 2010 04:22 PM
Current economic meltdown and its impact on employment scenario ekta.k Upload / Download Banking and Insurance Projects and Notes 0 February 23rd, 2010 05:12 PM
project on economic impact of govt. policies for the poor [email protected] PUBLISH / UPLOAD PROJECT OR DOWNLOAD REFERENCE PROJECT 0 September 1st, 2008 03:12 PM
 

Reply

Bookmarks

Tags
economic, hawala, impact

Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is On
Trackbacks are On
Pingbacks are On
Refbacks are On


Login
Forgot Password?  New User?
  

» Ads





» Recent Threads

Need help in choosing...
Last post by Vijay Chaudhari
5 Hours Ago 11:36 PM
0 Replies
Are women dominant ( 1 2 3... Last Page)
Last post by Sheeter Shokal
11 Hours Ago 06:18 PM
95 Replies
Why should we select... ( 1 2)
Last post by Sheraz Khan
17 Hours Ago 11:51 AM
12 Replies
Wisdom does not come...
Last post by Sheraz Khan
17 Hours Ago 11:50 AM
4 Replies
Happy Diwali to all...
Last post by Sheraz Khan
17 Hours Ago 11:45 AM
1 Replies
Indians Perform Better...
Last post by Sheraz Khan
17 Hours Ago 11:44 AM
4 Replies
Project on audit of...
Last post by Sheraz Khan
17 Hours Ago 11:42 AM
3 Replies
Do entrepreneurs need an...
Last post by Sheraz Khan
17 Hours Ago 11:40 AM
1 Replies
INTRODUCTION OF...
Last post by Sheraz Khan
17 Hours Ago 11:39 AM
3 Replies
IMPORTANT FINANCE...
Last post by Sheraz Khan
17 Hours Ago 11:36 AM
5 Replies
Future Courses To do...
Last post by Sheraz Khan
17 Hours Ago 11:31 AM
4 Replies
Short Presentation Topics ( 1 2 3... Last Page)
Last post by Alexandra Alfaro
20 Hours Ago 09:13 AM
74 Replies
citibank performance... ( 1 2 3... Last Page)
Last post by Manash Pathak
1 Day Ago 03:10 AM
85 Replies
AMWAY-Creating corporate...
Last post by Anabia Anum
1 Day Ago 02:22 AM
5 Replies
Role Analysis Technique...
Last post by Anabia Anum
1 Day Ago 02:19 AM
5 Replies

» Projects Helpline

Solution manual on...
Last post by Andrew Ken
3 Days Ago 06:35 AM
Stock Marketing TYBMS...
Last post by Rajat Audichya
1 Week Ago 05:42 PM
CRM- Hotel Industry
Last post by Matt Martin
1 Week Ago 10:32 PM
advertising in telecom...
by kpis_02
Last post by Mohit Utmani
1 Week Ago 10:45 AM
ManagementParadise.com is not responsible for the views and opinion of the posters. The posters and only posters shall be liable for any copyright infringement.


Management Paradise
About Us
Press
Jobs
Contact Us
Kartik Raichura
Legal
Terms & Conditions
Privacy Policy
Disclaimer
Copyrights
Help
Zeitgeist
Support
FAQs
Tour
Feedback
Partners
Follow
Copyright © 2004 - 2013 Management Paradise. Site Developed by Available.co.in