Note: the following article was submitted as part of CoinTelegraph’s Super Writers Contest.
On a recent trip to the stunning Thai island of Koh Tao, I was introduced to the Hundi system. This ancient system of informal money transfer through a network of brokers is ubiquitous in areas where migrant workers have a duty to send money back to families in their homeland.
Remittances to Burma
You may recall that Koh Tao is the stunning Thai island where two British backpackers were murdered last year, allegedly by two Burmese migrants. The fact that the accused are Burmese is no surprise given the large population of migrant Burmese workers on the island, mainly providing cheap labor to the bloated tourism industry.
Unsurprisingly, my Hundi educator was an intelligent young Burmese hotel waiter, whose daily mission was to sell us the standard, around the island long-tail boat trip. Given that we were persistently ambivalent to his poorly veiled sales patter, he tried a different tack and sought to get to know us and vice versa.
Throughout our typically breakfast time conversations (the waiter spoke very good English), I learned several things. He told me that he earned 150 baht per day, around US$5 - the Thai minimum wage is 300 baht (around US$10).
On Koh Tao, migrants have to pay certain levies in order to work on the island. These levies include 1000 baht (US$30) on arrival, and 500 baht per month for the right to work. Immigrants also face fees for the right to ride a scooter, along with curfews prohibiting them to be out after 8pm.
These levies are unavoidable as they are collected by police visiting the resorts and restaurants where the migrants work, and usually live. I learned that most Burmese have a fundamental distrust of banks, presumably due to the history of state corruption and the 2003 banking crisis. In any case, in order to get a bank account many migrants do not possess the necessary paperwork to open an account.
The young man had an absolute responsibility to return money back to his poverty-stricken family in southern Burma, or Myanmar as he referred to his home country. Every mention of his parents brought a flicker of a smile, tinged with sadness to his eager, young face.
Despite the arrival of Western Union and other money transfer agencies, most of the workers still rely on the Hundi system to deliver funds back home. The migrant deposits his money with a local Hundi agent, and then through the agent network money is paid out at the other end of the chain without physically moving any money. This is a system based entirely on trust and IOU's.
The workers depositing their cash with the local Hundi agent pay commission, anything from around 5%, to the agents for guaranteeing a sum of money for the would-be recipient at the other end. The agents also take advantage of exchange rate fluctuations by the time the money is in the hands of the intended recipient.
Can bitcoin help?
Being a crypto enthusiast, I immediately introduced bitcoin into this scenario. I wondered -Could bitcoin genuinely improve this situation and permit the workers to keep hold of more of their hard-earned and diminished wages?
Undoubtedly, the need for blind trust in a network of unknown and unregulated money brokers issue is resolved - tick. The sticking point here is how could the workers convert cash to bitcoin, and vice versa for the recipient?
Given that most of the young Burmese migrants are mobile tech-savvy, could hundi agents simply become exchanges, converting cash to bitcoin? If so, the agents would still charge commissions, and still probably try to make money on the exchange rates. Then there's the other barrier, instability of the bitcoin price.
In return for his candidness, I decided to introduce the young waiter to bitcoin, scribbling the word on a napkin for him to Google on his next day off. He looked thrilled at the prospect of discovering something that could potentially save him a few baht, and justify using his phone credits in doing so.
If anyone can make a system like bitcoin work, this enterprising underclass of young exiles can.
By Marc Edwards
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