For Afghans abroad, sending money home is harder than ever

Without the money he sends his family via Western Union Co. monthly, he said, they are running out of food. “How can I eat food when I have nine people back home who do not have?" said Mr. Barakzai, who lives in London.

Many Afghans get by with financial help from family members living abroad. But those remittances have become much harder to send and receive in the weeks since the Taliban gained control of the country.

The Taliban’s rise to power triggered Afghanistan’s rapid disconnection from the global financial system. The U.S. Treasury Department halted the shipment of dollars to the country and blocked Taliban access to the Afghan central bank’s reserves, most of which are held overseas. Bank branches temporarily closed, and ATMs ran out of money.

Money-transfer companies Western Union and MoneyGram International Inc. have suspended services in the country, in part to avoid running afoul of U.S. sanctions. Even the hawaladars—regional payment brokers that many Afghans use to transmit funds—have scaled back in response to a shortage of physical currency and security concerns, according to former Treasury officials and economists.

Disruptions in the country’s money-moving apparatus are choking off a key source of income for ordinary Afghans. Some $790 million in remittances flowed into Afghanistan in 2020, according to an estimate from the World Bank, a sum that accounts for about 4% of the country’s gross domestic product. Remittances typically increase in a country during times of crisis.

“This is not a good development and is likely to dampen the insurance role that remittances often play in the wake of disasters," said Dean Yang, a University of Michigan economics professor who studies the role of remittances in developing countries.

Sarah Alemi has tried both Western Union and MoneyGram to send about $1,000 from the San Francisco Bay Area to Afghanistan since the Taliban took control of the country.

Her nephew’s family in Kabul believes they will run out of food in September, she said. In a village outside the capital city, Ms. Alemi’s aunt is running low on the insulin required to keep her diabetes in check.

“It’s our obligation to help as a human being," Ms. Alemi said. “But what can we do now?"

Western Union and MoneyGram haven’t set a timetable for when they might resume services in Afghanistan. Both companies said they need assurances that their partner banks in the country have adequate liquidity to process their local transactions. The partner banks facilitate payments for the money-transfer services, receiving wires and disbursing cash to recipients at branches.

Western Union and MoneyGram also said they will follow guidance from the Biden administration on transactions to and from Afghanistan. Both companies said they understand the importance of remittances in the country and are committed to resuming services.

A Treasury spokesperson said the department continues to answer questions from financial institutions, including inquiries about the kind of transactions that might violate sanctions. The spokesperson said Treasury has informed financial institutions that transactions involving personal remittances are allowed because they are considered humanitarian aid.

Bank branches in Kabul began to reopen last week with limits on withdrawals, easing the immediate currency crunch. But Afghanistan’s central bank is likely to continue to run into problems supplying local banks with cash as long as it remains cut off from the global financial system, said Ahmad Shah Mobariz, an economics Ph.D. candidate at the University of Arkansas who studies the economic-development programs of his native Afghanistan.

Outside of Afghanistan’s urban centers, many remittances flow through hawala networks—webs of brokers who exchange funds without physically moving money. Experts expect this trust-based payment system, which is typically cheaper than banks or money-transfer services, to take on an increasingly important role if mainstream financial institutions continue to keep their distance.

Here’s how it works: A customer in New York City gives $1,200 to a local hawala dealer to send to a cousin in Kabul. The hawaladar in New York contacts a counterpart in Kabul, perhaps a relative or other trusted business partner, who delivers the equivalent in the local currency to the cousin. The New York hawaladar then owes her counterpart in Kabul $1,200. There is no single repayment method. The debt may be settled when a transaction goes in the opposite direction. It could also be repaid in physical goods. Many hawaladars operate import-export businesses.

Some hawaladars outside Afghanistan have limited their dealings in the country. Currency shortages have hawala dealers concerned that their Afghan counterparts won’t be able to complete transfers, said Amit Sharma, a former senior adviser on terrorism and financial intelligence at the Treasury who worked with hawala networks. They also are worried that the Taliban could impose restrictions that would prevent them from getting repaid, he said.

“If I can’t be sure that I am money good with my correspondent hawala dealer in Kabul, then I am less inclined to go ahead and send money there just because I don’t know if that money will come back," Mr. Sharma said.

Last month, Qadeer Popal and his wife tried to send about $150 from Canada to relatives in Afghanistan to help cover the rising costs of household staples. They tried Western Union and the local hawaladar, but both said they had paused sending funds to Afghanistan.

He even considered sending money to his wife’s cousin in Pakistan and having him cross the border. “That’s how bad the situation is," Mr. Popal said.

Mr. Barakzai is still searching for a way to send about £500, the equivalent of $689 or about 55,000 afghanis, to keep his family afloat for the next month. He said he has talked to his mother about selling valuables, maybe some of her jewelry, until he can find a way to help her and the rest of his relatives leave the country.

“It’s just been an absolute nightmare," Mr. Barakzai said.