Afghanistan

Sarai Sahzada (Kabul's central money bazar)



Within a simple yet vibrant setting, hundreds of millions of dollars circulate each day, making it the financial hub of the country. The exchangers in this bazar also offers loans; when a merchant has developed a relationship of trust with an exchanger, he may be able to acquire credit from the exchanger, thereby allowing him to expand the scale of his business. Money transfers are executed using a “hawala” system. A hawala money transfer involves the cooperation of business partners in two distant locations. For example, an exchanger in the bazar may have a partner in Tajikistan. This partner will have some clients seeking to send funds to Kabul an d other clients waiting to receive funds from Kabul. The two partners offset inflows and outflows of funds, such that, at the end of the given period, only a small amounts of funds needs to be transferred between them. When the two needs to offset funds, they may do so using banks transfers, through a trusted third party, or even by physically transporting the funds. Several times each week, the Afghan central bank sells American dollars to exchangers through an auctioning process to soak up excess local Afghanis from the economy. The total amount auctioned in 2017 was approximately $2.1 billion. Exchangers subsequently use these funds to perform transactions across the economy requiring American currency. The significance of this scale of activity becomes evident when nothing that the country’s annual gross domestic product in 2017 was in the order of $20 billion and that the total holdings in all the commercials banks was $3.59 billion in the same year.


The Need for Centralized Authority


Within a simple yet vibrant setting, hundreds of millions of dollars circulate each day, making it the financial hub of the country. The exchangers in this bazar also offers loans; when a merchant has developed a relationship of trust with an exchanger, he may be able to acquire credit from the exchanger, thereby allowing him to expand the scale of his business. Money transfers are executed using a “hawala” system. A hawala money transfer involves the cooperation of business partners in two distant locations. For example, an exchanger in the bazar may have a partner in Tajikistan. This partner will have some clients seeking to send funds to Kabul an d other clients waiting to receive funds from Kabul. The two partners offset inflows and outflows of funds, such that, at the end of the given period, only a small amounts of funds needs to be transferred between them. When the two needs to offset funds, they may do so using banks transfers, through a trusted third party, or even by physically transporting the funds. Several times each week, the Afghan central bank sells American dollars to exchangers through an auctioning process to soak up excess local Afghanis from the economy. The total amount auctioned in 2017 was approximately $2.1 billion. Exchangers subsequently use these funds to perform transactions across the economy requiring American currency. The significance of this scale of activity becomes evident when nothing that the country’s annual gross domestic product in 2017 was in the order of $20 billion and that the total holdings in all the commercials banks was $3.59 billion in the same year.








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