The Crisis, Hawala, and the Rise of Digital Transfers
TL;DR
Afghanistan is one of the world's most remittance-dependent economies — yet it is also one of the most difficult to reach through conventional banking channels. Before the Taliban's return to power in August 2021, formal remittances totaled approximately $789 million annually, representing around 4% of Afghanistan's GDP. The political transition triggered a cascade of financial disruptions: US and international sanctions froze Afghan central bank reserves, Western Union and MoneyGram temporarily suspended operations, and the formal banking system effectively collapsed. In the absence of formal channels, the informal hawala network — trust-based money brokers who have served Afghan communities for centuries absorbed much of the remittance flow. Today, the challenge is rebuilding accessible, affordable, and reliable remittance infrastructure for Afghanistan's massive diaspora and their families at home, with digital platforms playing an increasingly important role alongside the resilient hawala system.
Table of Contents
Why Remittances Are a Lifeline for Afghan Families
How the 2021 Political Crisis Disrupted Afghan Remittances
Understanding the Hawala System in Afghanistan
Digital Remittance Platforms and Afghanistan
The Current State of Afghan Remittances in 2025
How to Send Money to Afghanistan Today
Frequently Asked Questions
Why Remittances Are a Lifeline for Afghan Families
Afghanistan has faced decades of conflict, drought, and economic instability that have driven approximately 5.9 million Afghans to live outside their country of birth. The diaspora — concentrated in Iran, Pakistan, the United States, Germany, Australia, and other Western nations — provides critical financial support to family members who remain in Afghanistan, where unemployment is chronic, infrastructure is fragile, and access to formal financial services has historically been extremely limited.
Before the banking system's collapse, formal remittance inflows accounted for approximately 4% of Afghanistan's total GDP. The actual figure, when informal channels are included, was estimated to be substantially higher. The World Bank's formal measure of $789 million in 2020 excluded remittances transmitted through hawala and other informal systems — and in a country where an estimated 90% of financial transactions historically ran through informal channels and where only 15% of the population held bank accounts even before the 2021 crisis, the informal share of remittance flows is significant.
The importance of these flows cannot be overstated in humanitarian terms. For millions of Afghan families, monthly remittances from a relative working abroad are the primary or sole source of income, covering food, medicine, children's education, and basic household expenses. The Afghan economy lacks the formal employment base to support most of its population through domestic wages, making external family transfers structurally essential rather than supplementary.
How the 2021 Political Crisis Disrupted Afghan Remittances
The Taliban's rapid consolidation of power in August 2021 triggered an immediate and severe disruption to Afghanistan's financial system. The United States froze approximately $7 billion of Afghan central bank reserves held in the US, effectively removing the country's monetary anchor. The IMF halted financing and blocked access to Special Drawing Rights. International sanctions targeted Taliban leadership and created compliance uncertainty for financial institutions operating in Afghanistan.
Within days of the regime change, Western Union and MoneyGram — the two largest formal remittance networks with physical agent infrastructure in Afghanistan — suspended all services. Both eventually resumed limited operations in early September 2021, but the disruption demonstrated the fragility of formal remittance access and drove an acute surge in demand for informal alternatives. Those Afghans who had managed to flee the country faced additional challenges finding employment abroad while their families inside Afghanistan struggled to access funds due to bank branch closures, withdrawal limits, and a cash shortage that constrained even the hawala network's ability to disburse received funds.
The impact on remittance volumes was dramatic: World Bank data shows formal remittances fell from approximately $789 million in 2020 to around $300 million in 2021, a decline of more than 60%. Much of this decline reflected a shift from formal to informal channels rather than an absolute reduction in family financial support, but the data illustrates the severity of the disruption to measurable financial flows.
Understanding the Hawala System in Afghanistan
The hawala system is an informal trust-based money transfer mechanism that predates modern banking by centuries. The word "hawala" derives from Arabic, loosely translating as "transfer" or "trust." The system operates through a network of money brokers called hawaladars, who accept funds from a sender in one location and instruct a correspondent hawaladar in the destination location to pay an equivalent amount (less commission) to the designated recipient. No physical funds travel between the hawaladars in real time — settlement between them occurs periodically through trade payments, goods exchange, or reverse remittances that net the accumulated obligations.
In Afghanistan, the hawala system was estimated to handle approximately 90% of all financial transactions even before the 2021 crisis, reflecting both the country's low formal banking penetration and the hawaladar network's deeply embedded role in communities. Hawaladars are trusted members of local communities — merchants, shopkeepers, or dedicated money brokers — whose reputation provides the security that banks would otherwise supply. Transactions are arranged by phone, in person, or increasingly via messaging applications, with codes or personal references used to authorize recipient payouts in lieu of paper documentation.
The hawala system's strengths — speed, accessibility, low cost, and community trust — have made it indispensable in contexts where formal banking fails. Its weaknesses are the opacity that creates compliance concerns for international regulators and the dependency on hawaladars' individual liquidity and solvency. Since 2021, demand for hawala services has surged significantly, with CGAP research conducted in late 2023 finding that hawaladars have become the primary financial services provider for many Afghans, offering not just remittance services but also domestic transfers, foreign exchange, savings custody, and informal credit.
Digital Remittance Platforms and Afghanistan
The limitations of informal channels and the humanitarian imperative of maintaining remittance access have driven efforts to expand digital remittance services for the Afghanistan corridor. Remitly, one of the world's largest digital money transfer operators, has been among the platforms most actively expanding its Afghanistan coverage, and its 2021 IPO filing — submitted during the period of acute crisis — illustrated both the scale of the company's growth and the complexity of operating in high-risk corridors.
In its Form S-1 IPO filing, Remitly reported revenues of $257 million for fiscal year 2020, placing it among the world's largest digital international money transfer operators by revenue, slightly behind WorldRemit at $280 million and growing approximately twice as fast on average as established competitors. The filing also revealed that approximately 85% of Remitly's customers use its mobile application platform, and that India, the Philippines, and Mexico represented around 75% of the company's revenue and send volume in 2020 — highlighting that the Afghanistan corridor, while strategically important for humanitarian reasons, represented a growth opportunity for the company rather than a core revenue driver at that stage.
Digital platforms face significant operational challenges in Afghanistan that do not apply to most other corridors. The absence of a functioning central bank, limited banking infrastructure for last-mile delivery, cash shortage constraints on disbursement agents, and ongoing compliance complexity under international sanctions all require additional operational investment. WorldRemit and other operators have similarly sought to maintain and expand Afghanistan coverage for humanitarian reasons while carefully managing the compliance obligations that arise from operating in a sanctioned environment.
The Current State of Afghan Remittances in 2025
By 2025, Afghanistan's remittance situation has stabilized relative to the acute crisis of 2021 to 2022, though significant structural challenges persist. World Bank estimates suggest formal remittances recovered to approximately $350 million in 2022 and have gradually increased further, supported by the large wave of educated, middle-class Afghans who left the country in 2021 and have since established themselves in Western labor markets. The Afghan afghani actually strengthened substantially between 2022 and 2024 — appreciating approximately 27% against the US dollar through 2024 — driven in part by approximately $2 billion in estimated annual remittances from the diaspora along with humanitarian cash transfers from international organizations.
The hawala system remains the dominant remittance delivery mechanism for most of Afghanistan, particularly in rural areas. CGAP's 2023 field research found hawaladars generally open to further formalization and interested in regulatory clarity that would enable them to engage with international financial institutions more openly. Mobile money services are active in Afghanistan but primarily focused on humanitarian payment delivery, with high wallet dormancy rates outside the humanitarian context reflecting the persistent barriers to digital financial adoption in the country.
How to Send Money to Afghanistan Today
For members of the Afghan diaspora sending money to family in Afghanistan, the practical options in 2025 include Western Union and MoneyGram (which have resumed services to Afghanistan), digital platforms including Remitly and WorldRemit where coverage is available, and hawala brokers in diaspora communities for recipients in areas without formal service coverage. Before initiating any transfer, senders should verify that the specific destination in Afghanistan is serviceable by the chosen platform, confirm the recipient's ability to collect (particularly relevant for women and recipients in areas with security challenges), and compare the total received amount — including exchange rate and all fees — across available options.
Compliance awareness is also important: transfers to Afghanistan attract elevated due diligence from financial institutions due to sanctions considerations. Senders should be prepared to provide details about the purpose of the transfer and the relationship to the recipient, particularly for larger amounts. Using regulated, licensed money transfer operators is strongly recommended over unlicensed informal channels for both compliance and consumer protection reasons.
Frequently Asked Questions
How can I send money to Afghanistan from the US?
Western Union and MoneyGram have resumed services to Afghanistan and are accessible through their online platforms, mobile apps, and physical agent networks. Remitly and WorldRemit offer digital transfers to Afghanistan for specific delivery options. Hawala brokers in diaspora communities also provide service for recipients in areas not covered by formal networks. Always compare total received amounts across options before sending.
What is hawala and why is it used in Afghanistan?
Hawala is an informal, trust-based money transfer system operated through a network of brokers called hawaladars. It is used extensively in Afghanistan because it predates formal banking in the region, is accessible in rural areas without bank branches, is cost-effective, and operates on community trust relationships. An estimated 90% of Afghanistan's financial transactions historically ran through the hawala system, and its use surged further after the formal banking system collapsed following the 2021 regime change.
Are remittances to Afghanistan taxed or restricted by the Taliban?
The Taliban government has sought to exert greater oversight over the hawala system and has introduced regulations requiring hawaladars to register and comply with reporting requirements. Taxes on hawala transactions have been discussed and partially implemented in some contexts. The situation remains fluid and varies by region and operator. Senders should verify current regulatory conditions with their money transfer operator before sending.
What happened to Western Union and MoneyGram services in Afghanistan in 2021?
Both Western Union and MoneyGram suspended all services to Afghanistan on or around August 19, 2021, following the Taliban's takeover and the resulting international sanctions and compliance uncertainty. They resumed limited operations on September 2, 2021, following a decision by the US Treasury Department to implement measures aimed at maintaining humanitarian financial flows while respecting sanctions requirements.
How much do Afghans receive in remittances each year?
World Bank data shows formal remittance inflows to Afghanistan were approximately $789 million in 2020, representing around 4% of GDP. This figure fell sharply in 2021 due to the banking system disruption, recovering to approximately $350 million in 2022. Actual total remittance inflows, including informal hawala transfers, are estimated to be substantially higher — the World Bank and IMF have acknowledged the difficulty of measuring remittances that flow through informal channels.
