Is Hawala or Hundi Halal? What Islamic Law and National Laws Say

In Islamic law, a hawala or hundi transfer is not forbidden in itself. Hawala is a contract recognized in classical jurisprudence, and a transfer that involves no interest, no fraud and fair currency exchange is generally considered permissible. The bigger problem is legal: Pakistan, India and other countries ban unlicensed hawala and hundi, and most scholars say Muslims must not break such laws.

This article was first published in August 2023. It has been updated with the classical rules on hawala, the AAOIFI standard, current laws in Pakistan, India, the UAE and the United States, 2024–2026 remittance data and a comparison with formal channels.

Reviewed by Hafiz Maqsood Ahmed.

The question matters to millions of families. Remittances to low- and middle-income countries reached about $685 billion in 2024, according to the World Bank, with India, Mexico, China, the Philippines and Pakistan the largest recipients. A share of that money has long moved through informal networks known as hawala in the Arab world and hundi in South Asia. Pakistan received a record $41.6 billion in workers’ remittances in the fiscal year that ended in June 2026, up 9 percent, a rise attributed in part to a crackdown on illegal hawala and hundi operators that pushed senders toward banks.

How hawala and hundi work

A migrant worker in Dubai hands cash to a hawala agent, called a hawaladar. The agent contacts a partner in Karachi, who pays the equivalent in rupees to the worker’s family, often the same day. No money crosses the border at that moment. The two agents settle their balance later, through trade invoices, opposite flows of money or occasional bank transfers. The system runs on trust and is usually cheaper and faster than banks, especially in places with weak banking networks.

Hundi is the South Asian name for a similar system, which historically also served as a bill of exchange among traders.

What Islamic law says

Hawala, from an Arabic root meaning “to transfer,” is a contract in classical Islamic jurisprudence: the transfer of a debt from one person’s responsibility to another’s. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the main standard-setter for Islamic finance, devotes one of its Shariah standards, Shariah Standard No. 7, to hawalah. A modern money transfer is not identical to the classical contract, but scholars generally assess it with the same principles.

Scholars usually set three conditions for a transfer to be permissible:

1. No interest. A fee for the service is allowed; an amount that grows with time, as with a loan, is riba, which Islam forbids. Our guide to what Islam permits and forbids covers the prohibition of riba.
2. Fair currency exchange. When one currency is exchanged for another, many scholars require the exchange to be completed on the spot, in line with the hadith on exchanging gold, silver and other goods “hand to hand,” recorded in Sahih Muslim, The Book of Musaqah, Hadith 1587a. Scholars differ on how strictly this applies to transfers where the recipient is paid later in another country.
3. No deception or harm. The transfer must not be used for fraud, money laundering, tax evasion or financing crime.

The Halal Times does not issue religious rulings; readers should consult a qualified scholar about their own situation.

Where the law comes in

Most contemporary scholars hold that Muslims living in a country must obey its laws on matters that do not require them to disobey God, and that breaking laws meant to prevent harm, such as anti-money-laundering rules, is not permitted. Under that view, an unlicensed hawala transfer that is lawful in Islamic terms can still be impermissible because it breaks the law of the land. Whether a transfer is legal therefore depends heavily on where it is sent and received.

Hawala vs. formal channels

For Muslims, the practical upshot is that a licensed transfer service avoids both the legal risk and the religious objection. Islamic fintech companies now offer remittance services designed to meet Shariah standards. The same reasoning, permissible in principle but subject to regulation and risk, runs through debates over whether cryptocurrency is halal, another tool used for cross-border transfers.

Frequently asked questions

Is the fee charged by a hawala agent riba?

No, according to most scholars. A fixed fee for a service is payment for work, not interest. It becomes a concern only if the amount is tied to time, like interest on a loan.

Is it sinful to receive money sent by hawala?

Scholars generally focus on the sender and the agent. A recipient who does not know the transfer was illegal is usually not considered at fault. Those who work in finance and face similar questions about their role may find our article on working in a conventional bank useful.