Somalis in Minneapolis protested in the streets of St. Paul, angry that local banks will no longer honor hawala transactions.

Minneapolis-St. Paul, a center in the United States for hawala transactions, is the home for many Somalis that want to send money back to their relatives.

A Hawala Dar sending money from Peshawar.

The hawala system allows people to move sums of money across borders with no formal record of any kind. It presents a challenging question. On the face, it seems like a system tailor-made for criminal networks such as Al-Queda. On the other hand, it serves as a substitute mode of money remittance to countries where there is no real banking system.

How does it work? A person finds his local hawala dar – a name for a money transmitter whose profession has often been passed down for generations – and gives him a sum of money. The halawa dar contacts another hawala dar and asks him to advance money to the intended recipient. The hawala dars never exchange money. The only record is among dars. Each keeps a running tab with the other. The debts are cleared through (more…)

Editor’s note: This is a guest post by Daniela Baker, the editor of CreditDonkey.Com. CreditDonkey is a personal finance blog.

A new survey by the Federal Deposit Insurance Corporation has found that about one in thirteen Americans does not have a checking or savings account. The survey found that over a quarter—24.6 percent—of all American households either don’t have a checking or (more…)

Even if people are ready to abandon the idea of using the prepaid card platform as a way to rebuild the credit of unbanked consumers, it is worth giving the idea another try.

Pay Rent Build Credit (“PRBC”) established a new model for helping people to build credit when it appended a non-traditional credit reporting service onto prepaid debit cards. The idea was to (more…)

The US Department of the Treasury is set to announce the private partners that will roll out its new debit card aimed at unbanked consumers that need a place to deposit their tax refunds.  Under the pilot, Treasury hopes to add more individuals to their Direct Express platform.

The Treasury Department indicated that this plan was in the works last September. The update is that they will (more…)

Many Americans are never going to retire.

On Tuesday, I laid out an argument for why most Americans cannot afford a payday loan. The main thrust of that blog focused on the “median” American household, which has about $100,000 in assets.  But what about the majority of Americans are not median, and in particular, those individuals who fall onto the low side of the bell curve?

The low-income median is much lower. According to the 2007 Survey of Consumer Finances (pdf), the lowest quartile of American households had a median of $1,200 in net worth.  That is the good news. The median is much (more…)