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Indian Migrants Fall on Hard Times

On August 3, 2011

Indian migrant workers in destinations such as the Middle East and Malaysia have fallen on such hard times that instead of sending money back home through the hawala (informal money transfer) system, many are receiving money from India, according to this story.

This strange reversal is another indicator of how hard migrant workers have been hit by the recession. We have blogged before about that the impact that the downturn is having on migrants in the Gulf, with many being dismissed from their jobs by cash-strapped employers- in many cases with unpaid wages - and ending up stranded with no means of returning to their home countries - see here and here.

Stories of remittance workers having to rely on money sent by relatives in India - instead of sending money back home to support their relatives - may be hard to verify, but sound credible.

The Directorate of Enforcement in New Delhi, which tries to monitor the inflows of money that migrant workers send back into the country through the hawala system, noticed the trend this year. They conducted an investigation on money transfers from Kerala, where huge numbers of the adult male population work as labourers in the Gulf, which revealed that more money was flowing out of the state to the Gulf than was coming in.

The flow of money between the Gulf, Malaysia and India is a hugely important part of day to day life in states like Kerala. Indian channel IBN goes into further detail:

According to people familiar with the reverse hawala operation, once the money is handed over to the expatriate’s dependents in Kerala, they collect the interest on a daily basis. ‘The meter is running’ is how it is referred to in local parlance. The ‘meter’ stops only when the capital amount is returned in full.

The money is used by these rackets that are active in the state to carry out illegal money lending to Malayali labourers working abroad. They demand huge interest rates and give away the money after collecting their passports as security. Their agents working back home also collect deeds of land in Kerala as security. The scenario is hotting up and we are probing how many hawala agents are involved in this ,” said a top cop in Kerala.

Hawla money is also flowing to Malaysia and parts of Singapore other than the Gulf region, he said.

Reverse hawala has already claimed its first victim. This came to light recently after the arrest of Sherif from Attingal for the gruesome murder of his client Salim, an NRI from Saudi Arabia, which the police term as ‘murder for profit’. Sherif too used to work in Saudi Arabia.
“Sherif, a taxi driver in Riyadh in Saudi Arabia, had borrowed nearly Rs 75 lakh from Salim last year. He used the amount to run his own money lending operation to migrant workers in Riyadh. We are now probing the conspiracy theory and whether there are more people are involved in hawala transactions,” a police officer from the investigation team said.
When ‘Express’ contacted NRIs working in Gulf region they said the loan sharks became active after the recession hit the market.
“The loan sharks became active after the banks in here introduced stringent norms to grant loans, particularly to NRIs of low income group. The money lenders pay the money in Indian currency, through their agents, to the family of the NRIs in Kerala. The amount in turn is collected with high interest rate in Dirham within four to six months from the person working here by these groups,” said Suresh Kumar, working with a firm in Al Quasais in Dubai.

See full story here.