Question Summary:
Is it permitted to hoondi business? Exactly like what western union, money gram companies are doing ?

Question Detail:

Is it permitted to hoondi business? Exactly like what western union, money gram companies are doing ? Sender will have to pay for more local currency to get the USD and recipient will get less in local currency when he receive. Can any muslim do this business. permitted or not ? Zazakumullah.

Answer :

In the name of Allah, Most Gracious, Most Merciful
Assalaamu `alaykum waRahmatullahi Wabarakatuh
Islam permits the transaction of Hawala (transferring of debts), on condition that all parties involved in the transaction are content with the transfer. For example, if Zaid owes Khalid R100, it will permissible for Zaid to transfer the debt upon Amr and request Khalid to collect the R100 from Amr, on condition that Khalid and Amr agree to it.
الحوالة جائزة بالديون وتصح برضا المحيل والمحتال له والمحال عليه

(Mukhtasar al-Qudoori Pg.108 – Aaram Bagh, Karachi)
Based on the same principle, it will be permissible for one to request another person or an institute to transfer a certain amount of money to another person. The fee that the institution gains from the transaction is consideration for delivery of the money and will be permissible.
However, if one wishes to transfer money in a currency different from the one presented for transfer, then the transaction consists of a combination of currency exchange and a transfer of money. The exchange of currency will be permissible as long as the exchange rate is fixed and both the parties agree to it. The difference in the exchange rate from the bank rate will not have an effect on the transaction as long as the rate is fixed at the time of transaction. Once the exchange of currency and the transferring of money are done according to the principles of Shari’ah, the transferring of the money in another currency will be permissible.
In the light of the abovementioned, it will be permissible for Western Union, Money Gram, etc. to charge a fee for the transfer of money and fix an exchange rate different from the rate prevalent in the bank. These transactions will also be permissible for a person doing the hoondi business. We will not be able to comment on the dealing of the hoondi business as a whole unless we receive clear clarification of the procedure of the business.
And Allah knows best
Wassalam
Ml. Abu Yahya,
Student Darul Iftaa
Checked and Approved by:
Mufti Ebrahim Desai
Darul Iftaa, Madrassah In'aamiyyah