Essays on alternative remittance systems

Abstract

This dissertation studies alternative remittance systems from a comprehensive approach. It tries to fill two main gaps identified in the literature; the foundations of the confrontation that exists between the legality and legitimacy, and the lack of quantification of these informal transactions. Following the idea that what it is not understood properly, could not be estimated accurately, this dissertation explores the key dimensions of informal remittance systems that so far have been ignored and it offers a step forward in the estimation of the scope of their activity. Chapter 2 explores the roots of alternative remittance systems with special focus on their ethical dimension. Hawala, an ancient informal financial practice rooted in Islamic moral traditions that has become the most widely known informal transfer mechanism, is the example used to offer a down-to-earth analysis of the issues at stake. The following chapters offer a quantitative assessment of the scope the two-pronged activity of alternative transfer mechanisms. In particular, Chapter 3 focuses on the impact of these systems on official remittance flows. Chapter 4 studies their link with the smuggling of licit goods. This dissertation concludes that it is necessary to acknowledge the cultural basis of some financial practices and bring over a change in the regulatory approach. It becomes imperative to develop suitable and convenient instruments to alleviate the financial exclusion on a global scale The relationships between the activity of alternative remittance systems and bad economic policies or dysfunctional public institutions are extremely endogenous and they have important implications for economic policy.