Hawalah
حوالة
Pronunciation: hah-WAH-lah
Transfer of a debt from one debtor to another, and the basis of informal and formal remittance systems.
Definition
A contract that transfers a debt from the original debtor to a third party who agrees to pay it, with the creditor's consent. The creditor then looks to the new debtor.
Classical hawalah let merchants settle obligations across distances without moving coins, and the same logic underlies the informal hawala remittance networks still used across Asia and Africa, as well as formal transfers through banks and money services. A hawalah must transfer the debt at face value; a fee for the transfer service is permitted, but any increase in the debt itself is riba.
Related Terms
Daynدين
Debt: a fixed obligation owed by one party to another, which Islamic law protects but forbids trading for profit.
Bay' al-Daynبيع الدين
Sale of debt: trading a receivable for cash, permitted only at face value by most scholars.
Wakalahوكالة
An agency contract where one party appoints another to act on their behalf for a fee.
Ujrahأجرة
A fee or wage charged for services rendered - the Islamic basis for fee-based financial services.
Ibra'إبراء
A rebate or waiver: the creditor gives up part of what is owed, typically on early settlement.
Ta'widhتعويض
Compensation for actual loss caused by late payment, which the creditor may keep.
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Hawalah (حوالة) - Transfer of a debt from one debtor to another, and the basis of informal and formal remittance systems. A contract that transfers a debt from the original debtor to a third party who agrees to pay it, with the creditor's consent. The creditor then looks to the new debtor.
- Transfer of a debt from one debtor to another, and the basis of informal and formal remittance systems.
- Category: Contracts
- Related: Dayn, Bay' al-Dayn, Wakalah, Ujrah, Ibra', Ta'widh
- Compare related Shariah-compliant products on HalalWallet
Source: HalalWallet (halalwallet.ca)
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Reviewed by: HalalWallet Editorial Team
Last reviewed: 2026-10-01
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