Hundi payment mechanism on the border trade between Myanmar and Northern Thailand: what you do not know about?
| Date | 06 July 2023 |
| Pages | 579-594 |
| DOI | https://doi.org/10.1108/JMLC-05-2023-0083 |
| Published date | 06 July 2023 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Nisit Panthamit,Paisarn Panthamitr,Guowei Tian |
Hundi payment mechanism on the
border trade between Myanmar
and Northern Thailand: what you
do not know about?
Nisit Panthamit and Paisarn Panthamitr
Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand, and
Guowei Tian
International College, Krirk University, Bangkok, Thailand
Abstract
Purpose –This study aims to convey the understanding of the ecosystem –how “hundi”works on the
border trade between Myanmar and northern Thailand, which is an informal transfer system and is
widely used as an alternative banking system. Even though the role of hundi is unable to declare the
sources of money under the standard settlement of formal banking system, a failure to operate of its
official mechanism are carrying using hundi, as a financial platform across the border between
Thailand and Myanmar. This study surveys the best practice mechanism for the r egional and
international cooperation.
Design/methodology/approach –This paper draws on relevant literature,open-source reporting, and
interviews with more than 30 interviewees on the border between Thailand and Myanmar. Interviewees
includes border-trader, money changer, money transfer operators, business leaders, hundi operators,
immigrantlabors, government officials and commercial bankingstaffs.
Findings –This study provides a unique insightof hundi system, which work as the alternative mode of
formal banking. It is an informal fund transferpayment platform used on the border between Thailand and
Myanmar in the past five decades. It insists that hundi plays a significant role in both substitution and
complementaryon the trade and payment across the border of Myanmar–Thailand. Even though confronting
with the barriers of financingof terrorism (anti money laundering AML/combatingthe financing of terrorism
CFT) risk, the competition with the expanding and modernizingformal banking sector, and the introduction
of Fintech and mobile money services. In the short term, these are unlikely to eliminate the hundi system
completely,but may instead push hundi operators towards adopting these networks and technologiesin their
own operations.
Social implications –This paper will be a useful source for academics, development professionals,
policymakers, law enforcement agencies and business actors who are seeking to understand Myanmar’s
informalpayment system, hundi.
Originality/value –This is the latest work for border trade payment or trade financing role of hundi
which has hidden underthe informal market of the border for several decades. It has few research of hundi on
border trade and payment,particularly after the military coup in 2021 which made hundi return to be on the
This research is based upon work supported by Faculty of Economics, Chiang Mai University,
Thailand (Fiscal Year 2561). This research was partially support by Chiang Mai University.
Authors’contribution: Nisit Panthamit (NP) designed the concept and drafted the manuscript.
Paisan Panthamitr (PP) and Guowei Tian (GT) prepared the data and analysis. NP and GT
contributed to the writing of the final version of the manuscript. Percentage contributions are NP:
70%, PP: 15%, and GT: 15%. All authors read and approved the final manuscript.
Declaration of conflict of interest: The authors declare no ethical issues or conflict of interest in
preparing this manuscript.
Hundi
payment
mechanism
579
Journalof Money Laundering
Control
Vol.27 No. 3, 2024
pp. 579-594
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-05-2023-0083
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
spotlight and simultaneousmechanism of border trade and payment ecosystem of Myanmar.This paper will
be a useful source for academics, development professionals, policymakers, law enforcement agencies and
business actors who are eager to understand Myanmar’sinformal payment system, hundi, especially during
the hardship.
Keywords Border trade, Border payment, hundi, Hawala, Informal transfer payment,
Thailand–Myanmar
Paper type Research paper
Introduction
A lot of work on informal transfer payment has been studied widely since September 11
incident in the USA, which renewed the public interest to focus on the informal funds
transfer (IFT) systems (Zagaris, 2007) and (Viles, 2008). Hundi is what is known as an
“informal value transfer system”.Varieties of hundi can be found in many countries around
the world. Through agents, money can be remitted domestically or internationally, but the
money does not move either physically or through the banking system.Instead, the agents
who handle the transaction usually settle the debt in another way (Frontier,2023a, 2023b).
The popular paper by El Qorchi et al. (2003) has been mostly cited in vast literatures,
especially in terms of “Hawala”. The IFT has been defined in many meanings —in Niger,
Nita; in Mali, Senega; in Comoros, Fax; in Somalia, Hawala; in India, hundi; in China and
Myanmar, Fei-Chien; in Philippines,Padala; in Hong Kong, Hui Kuan; and in Thailand, Phei
Kwan.
Hundi has been well accepted for the cross-border-funds purpose in developing
countries. But it has been argued by two sides, the regulators and the users, who
participate in the informal activities. hundi has many positive characteristics, such as
fast speed, low transaction cost, cultural convenience and versatility. All these
characteristics also have contributed to their abuse on the opposite side. Zagaris
(2007) concludes that hundi is robust in jurisdictions where formal banking systems
are absent or weak, or where structural obstacles distort foreign exchange and other
financial markets (Zagaris, 2007). In countries with limited financial capacity, hundi
plays a critical role. The initial growth of hundi was primarily due to their facilitation
of trade among distant regions at a time when conventional banking instruments were
either weak or absent. But on the negative side, hundi has made the fiscal implications
for both remitting and receiving countries because it has no direct or indirect tax paid.
Therefore, it has a negative impact on government revenue which applies equally to
both legitimate and illegitimate activities that involved the hundi system. It has not
selected the appropriate regulatory and supervisory to response yet, it requires a
realistic and practical assessment, and an understanding of the specific country
environment in which the IFT dealers operate (El Qorchi et al., 2003).
The literature studies and research conclusion were based on the using and the
understanding of the idea of “hundi”in practice that hasdifferent names across the region
by many different names, and they continueto successfully operate in all parts of the world
(Jost and Sandhu, 2000) Among vast studies, MiddleEast (Maimbo et al.’s 2003); South Asia
and Malaysia (Shanmugam, 2004); Pakistan(Raza et al.,2017), Europe (Wang, 2011), Africa
(World Bank, 2018) Central Asia (World Bank, 2003a;World Bank, 2012), Somalia (Ismail,
2007); and AfrnanistanRahimi (2021).
Hundi role in Myanmar has been well-equippedas international dimensions of the hundi
business for Myanmar from a boost from the exodus of politicaland economic refugees after
the crushing of the 1988 national uprising (Downing and Mon, 2017). It has been popular
JMLC
27,3
580
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