How Hawala Networks Are Reshaping Liberia's Informal FX Market — and What the CBL Thinks of Them

Liberia's formal remittance system — money transfer operators licensed by the CBL and operating through bank partnerships, including MoneyGram, Western Union, and Orange Money's international remittance product — processed approximately $56 million in inbound transfers in 2025. This figure, sourced from CBL balance of payments data, significantly understates the total remittance flow from the Liberian diaspora. Industry estimates, triangulated from mobile money transaction data, border surveys, and interviews with community associations in the United States, United Kingdom, and Ghana, suggest that an additional $120–180 million flows through informal channels annually — through community couriers, informal money dealers, and what is loosely termed the hawala network: trust-based value transfer systems in which money is transferred through a network of brokers without physical movement of cash.

The informal FX market creates a structural challenge for the CBL in two ways. First, it represents a significant source of foreign exchange supply that does not pass through the formal banking system and therefore cannot be captured in official reserve data or used to support the CBL's exchange rate management operations. The $18 million the CBL spent defending the LRD in March and April would have been unnecessary — or at least smaller — if informal remittance flows could be channelled through the formal system. Second, the informal network creates the conditions for regulatory arbitrage: households and businesses that want to move money at rates better than the official corridor can access informal dealers at rates 2–4% more favourable than the formal interbank rate, a spread that reflects the informal network's lower operating costs and its freedom from CBL compliance requirements.

The CBL's regulatory response has evolved significantly. The previous approach — declaring informal money transfer operations illegal and attempting enforcement through the Financial Intelligence Unit — was largely ineffective and drove the networks further underground. The current CBL Governor has signalled a preference for a different model: a regulatory framework that allows informal operators to register as 'basic money transfer agents' with simplified compliance requirements, in exchange for transaction reporting and identity verification. Several West African regulators, including the Bank of Ghana and the Banque Centrale des États de l'Afrique de l'Ouest, have implemented similar frameworks with partial success. The challenge is that the informal networks' competitive advantage lies precisely in their simplicity and discretion — any regulatory burden that eliminates those advantages removes the incentive to formalise.