Pardee-CFLP-Remittances-TF-Report

oader approach to post-conflict remittance systems and the possibilities of theirinstitutional integration. Conflict-induced remittance systems have often provento be highly entrepreneurial in character, encouraging local adaptations thatcreate linkages between financial institutions of different levels and degrees offormality. Contemporary informal remittance systems form increasingly complexglobal financial networks that are still very poorly understood. This sectionexamines the modern informal remittance sector with its origins, social embeddedness,and global connections, and explores the contributions and challengesof informal remittances to post-conflict development. A broader approach toremittance institutions is suggested that provides flexibility to adapt to specificlocal practices and to draw broader institutional connections in an era of growingpopulation displacement and increasing movement of people and capital acrossinternational borders.Informal Remittance Transfer Systems: Origins and HistoryThe modes of remittance delivery have frequently been divided into the categoriesof “formal” or “mainstream” and “informal” or “alternative.” Formal channelsof remittance transfer include banks as well as some non-bank financialinstitutions such as dedicated and licensed money transfer operators (includingWestern Union and MoneyGram), post offices, and various side services offeredby microfinance institutions or credit unions. Alternative or informal modes oftransfer include physical transfers or courier services of money or goods (oftenvia traders or public transport operators); sideline remittance services offered byvarious types of cash-intensive businesses (shopkeepers, market traders, foreignexchange outlets, travel agents, phone and fax shops, transportation companies);sharing stored value, debit and credit cards; as well as dedicated small-scalemoney transmitters (Sander and Maimbo 2003; Pieke, Van Hear, and Lindley2007; Passas 2003). Remittances classified as “informal” or “alternative” thereforelie outside the realm of banks or licensed money transfer companies, and theirsupervision by regulatory agencies is generally limited.One of the most widespread informal money transfer systems, hawala, originatesin early Middle Eastern and South Asian societies and has a rich and complexhistory. As a mechanism for debt transfer, it emerged as a tool to facilitate longdistanceand cross-border trade in conditions of incomplete legal frameworks andinsufficient means of payment. Various similar arrangements have been recordedin many parts of the world—including fei-ch’ien or the Flying Money system ofChina, which emerged in the second half of the first millennium and played an22 A Pardee Center Task Force Report | October 2013