Branchless Banking: “A Substitute for Hawala System in Pakistan”

Branchless banking is making transaction without visiting a formal banking system. It includes; internet, SMS banking, mobile banking, ATM’s, POS and EFTPOS. Mobile banking has become the future of formal banking system. Hawala is an informal, traditional system for financial transactions in which no money actually enters in bank; all transactions are based on trust among the parties. In Pakistan, majority lives in rural areas and literacy rate is not phenomenal. Number of mobile phones connections is much higher than bank accounts. This work is done with the aim to acknowledge the importance of branchless banking in financial transactions and can it really help us in fighting against money laundering and other illicit functioning through Hawala, which is widely used in underdeveloped and developing countries like Pakistan. Furthermore, this paper also aims at highlighting the similarity between Hawala and Mobile Banking and to explore if these similarities could bring the unbanked population into financial mainstream.