Business for mobile money-exchangers thrives in cash-strapped Lebanon

In the bustling intersection of Hadi Nasrallah highway in south Beirut, about 20 young street vendors gather, eagerly seeking potential customers passing by in their cars or on scooters.

But these aren't the hawkers of fruit, tissues or water bottles.

The sellers are waving banknotes bound with elastic bands, whipped in and out of small leather pouches worn over the shoulder or around the waist.

These young men are street money exchangers, a new line of activity flourishing in cash-strapped Lebanon.

The devastating economic crisis which unfolded in 2019 after decades of corruption and mismanagement has turned Lebanon into a cash economy.

The once-praised financial sector has suffered around $70 billion in losses, which has locked people out of their life savings and turned banks into “zombie banks” with limited services.

Businesses rarely accept credit cards, unwilling to trust Lebanon’s banking sector, which has been drastically restricting withdrawals through informal capital controls since 2019.

The country largely relies on remittances from the diaspora who send billions of dollars each year to their relatives, who then convert part of the funds into Lebanese lira to finance their daily household needs.

On the other hand, Lebanese lira earners usually seek to exchange the rapidly devaluing local currency, which has lost 98 per cent of its value since 2019, for coveted US dollars, be it for securing their savings or paying in dollars abroad.

The constant juggle between the dollar and the Lebanese lira has created a business opportunity for these young men who engage in roadside transactions to serve rushed clients.

Most of these street exchangers also offer delivery services on their scooters.

“I earn approximately $10 per day”, said Mohamed, a 20-year-old student, as he closely examines a banknote handed to him by a customer to ensure its authenticity.

He said he works in collaboration with a licensed exchanger who supplies him with money every morning, and with whom he shares his daily profits at the end of his shift.

His colleagues confirmed to The National that they are earning between $200 and $300 a month.

Most of the men interviewed said they had to take up this job due to the economic crisis.

“I couldn't find a job. At least now I work on my own terms. A formal job would probably not pay better”, said Ziad, a self-employed street exchanger who operates in a neighbourhood in near central Beirut.

Ziad said he works 12-hour shifts at the same spot, where he has set up a chair and a parasol, next to which he has parked his scooter which doubles as a safe.

Political protection

As common as these transactions may be, they are illegal. Authorities are trying to mount a crackdown on unauthorised currency exchangers, accusing them of engaging in speculative practices against the national currency.

Ali, a 26-year-old street exchanger, said political protection is required to operate without being apprehended by the police.

“There are certain neighbourhoods where you can conduct this business and others where you can't without being arrested and thrown in jail for a year”, he said.

He said that the political protection depends on the region where they operate.

Ali works in the southern suburb, a stronghold for Hezbollah, the powerful Iran-backed party.

“The economic conditions are so dire that they allow us to work in this field”, he added.

“It provides us with a halal opportunity to earn money without resorting to illegal activities.”

But even if they avoid arrest, there are other risks.

Money exchangers are a magnet for thieves – for obvious reasons.

Ali says colleagues have been targeted by thieves so he always carries a weapon.

“No one dares to steal from me”, he said with a swagger, lifting his shirt to reveal the pistol stuck to his hip.

He said that the incidents were generally limited due to the widespread understanding that they enjoy political backing.

A spokeswoman for Hezbollah denied that it provides any protection for exchangers.

“They can be found everywhere in Lebanon, without exception. We do not intervene in this at all and we cannot replace the role of the state in that matter”, she said.

Cash economy and money laundering risk

Lebanon's cash economy, in which these young exchangers play a part, shows no signs of slowing.

According to a World Bank report, titled Normalisation of Crisis is No Road to Stabilisation, published on Tuesday, cash accounted for $9.9 billion of the country's economy last year, almost half the size of the whole economy.

The ruling class's inability to take action and restructure the banking sector has led to a 63 per cent increase between 2021 and 2022, the World Bank report said.

Economist Jean Tawileh said that the heavy reliance on cash transactions takes a steep toll on the Lebanese economy.

“The cash economy is extremely difficult to control, in this light, it poses a risk in facilitating money laundering and terrorist financing. Amid increasingly strict international regulations to track ultimate beneficiaries of money flows, this can result in Lebanon being put on the Financial Action Task Force blacklist”, the global money laundering and terrorist financing watchdog, he told The National.

“It also poses challenges for fiscal discipline and opens up significant opportunities for tax evasion as transactions can easily escape reports to authorities”, he added.

*All the street exchanger's names have been changed to protect their anonymity