Finding the smartest mode of overseas money transfer is a concern especially for many expatriates, most of whom send money to their families back home. Speed, economy and security are the main features they look for in remittance instruments, such as, online and mobile phone transactions. “A popular remittance choice for expats is the draft system. For decades, I have seen foreign workers queue outside banks the first week of every month. They are the only breadwinners of their families back home, who anxiously await the money transfer,” said Syed Saleem Quadri, a banking professional. He said that another mode – the telex transfer – is faster than the draft system, although costs involved in the latter are relatively high. “Unfortunately, there are many expats who send money through the illegal transfer system of hawala (also known as hundi),” said Quadri. Hawala transfers are illegal and informal. They are not effectively regulated by the government. However, Quadri listed three reasons why hawala is favored by some expats. According to the World Bank's website, the exchange rate margin for remitting money from Saudi Arabia to Bangladesh is 0.13 percent which is 2.84 percent of the total cost, to Egypt 2.13 percent of exchange rate margin and 5.40 percent of total cost, to India 0.45 percent of exchange rate margin and 3.08 percent of total cost, to Jordan 2.18 percent of exchange rate margin and 5.84 percent of total cost, to Pakistan 0.28 percent of exchange rate margin which is 2.50 percent of total cost, to the Philippines 1.61 percent of exchange rate margin which is 5.07 percent of total cost and to Yemen 0.03 percent of exchange rate margin which is 2.70 percent of total cost. These figures are for the collection period of the third quarter of 2009. Quadri said remittance schemes offered by some banks are also popular due to “a good exchange rate and speed”. According to him, all major banks offer online money transfer ranging from a few days to immediate transfer to the accounts of the beneficiaries. Additionally, some agencies “send money in minutes and offer rates higher than the usual bank rate,” he said. “In the credit card system, an individual sends money to his account, which can be withdrawn with his credit card by his family from an ATM anywhere in the world,” he explained. “However, illegal workers in the Kingdom send money through hundi or hawala because those are the only options available to them. “I chose to transfer money through an illegal channel because I thought it was convenient and guaranteed delivery of money at the doorstep. However, this caused many problems for my family in India,” said an Indian expat (requesting anonymity) in Jeddah, who remitted a few years back a “large amount of savings that I accumulated over months”. The amount was SR45,000, all of which he said he “lost in the transaction”. “When the amount is large (typically amounts above SR20,000), questions are raised. You must obtain a printout of your bank statement attested by the bank along with a mini statement from the ATM machine of your bank. As per the rules of the Saudi Arabian Monetary Agency (SAMA), these documents are verified by all banks and exchanges as a measure of safety against money laundering. However, in an effort to save time and energy pursuing these formalities, many expats like me end up loosing a lot of money due to the hawala system,” the Indian expat said. Quadri said the transactions are lost when the dealers involved in this illegal business are raided by the authorities. “This mode (hawala) was used by people living in Asian countries who accumulated a lot of wealth through illegal ways,” said Quadri. According to reports, remittances from Saudi Arabia's estimated nine million mostly Asian foreign workers are soaring as the Kingdom recruits more expats for its massive development projects. “Expatriates from South Asia have been working in Saudi Arabia for more than three decades. The increase in their remittances is due to the rise in their numbers and a hike in salaries,” said Quadri.
