Hawalah

A contract that transfers a debt from the original debtor to a third party who agrees to pay it, with the creditor's consent. The creditor then looks to the new debtor.

Classical hawalah let merchants settle obligations across distances without moving coins, and the same logic underlies the informal hawala remittance networks still used across Asia and Africa, as well as formal transfers through banks and money services. A hawalah must transfer the debt at face value; a fee for the transfer service is permitted, but any increase in the debt itself is riba.

For U.S. Muslims, hawalah comes up in two places: sending money home and refinancing. On remittances, the contract explains why a transfer fee is permitted while any difference between what you pay and what arrives, beyond a disclosed exchange rate and fee, is not.

Formal remittance companies are licensed money services businesses regulated by FinCEN and state regulators, and using them is an ordinary hawalah executed through agency. Informal hawala networks are legal only when the operator is registered as a money services business; unregistered hawala is a federal offense under 18 U.S.C. 1960 regardless of intent, so the Shariah permissibility of the contract does not settle the legal question.

On refinancing, hawalah is one of the mechanisms scholars analyze when a halal provider takes over an existing obligation: if the provider simply assumes your conventional loan and you pay the provider interest-free, that is a hawalah plus a qard, which is permitted; if the provider buys the property and resells it under Murabaha, the loan is extinguished rather than transferred. Credit card balance transfers are the opposite case: the new issuer pays the old one and you now owe the new issuer with interest, which is a new riba contract, not a neutral transfer.