Hundi is an informal cross-border money-transfer system that bypasses the legal banking system. Hundi can be defined as a financial instrument or a negotiable bill of exchange, which was used for carrying out trade and credit transactions developed in Medieval India.
A Hundi is primarily an unconditional contract or order which warranties a monetary payment which can be transferred by valid negotiation. Hundi transactions typically involve two parties- the drawer and the payee. The drawer is the person who owes money and writes the hundi, while the payee is the person to whom the money is owed.
According to the World Migration Report 2022, Bangladesh has risen to the seventh largest remittance-receiving country. Only 51% of the remittances that come to Bangladesh comes through formal and legal ways. And the rest, 49% of the remittances, come through hundi according to the finance minister.
The current exchange rate is slightly above Tk 110 whereas the local banks are exchanging dollars for Tk 110, and the kerb market sells it above Tk 120 per dollar. So, people prefer to transfer money through hundi rather than banks to get more money.
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It is important to note that the use of hundis is more prevalent in traditional or informal economic systems and may not be legally recognized in modern financial systems. In many cases, hundis are used in areas with deep-rooted trust-based relationships and cultural practices.
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