WE TRUST PEOPLE, NOT BANKS: A QUALITATIVE ANALYSIS OF HUNDI–HAWALA PRACTICES AMONG PAKISTANI MIGRANTS

Abstract

The current study examined the factors contributing to the reliance of migrants from Pakistan on informal remittance systems, namely Hundi and Hawala, and the reasons for the continued use of informal systems, despite the availability of formal banking systems. As part of the exploratory qualitative research study, and under the interpretivist framework, the researcher used semi-structured in-depth interviews with overseas Pakistani workers, remittance-receiving households, bank employees, and exchange company employees, as well as policy and document analysis. A combination of purposive and snowball sampling methods was used to capture the undocumented and informal migrants who exclusively depend on informal channels. Economic, speed and convenience factors, as well as structural factors, including migrants' legal status and access to banking systems, were found to reinforce the reliance on informal systems. Positive informal relationships with hawala agents, socio-cultural relationships, legal status, unregulated policy systems, and certainty on exchange rates were among the factors contributing to reliance on these informal economic systems. From the findings, there is a need to create formal structures for remittance systems addressing the informal socio-economic systems and in which migrants, financial institutions, and regulatory systems are embedded. This research helps advance studies on informal finance, financial inclusion, and migration by providing evidence-based policy recommendations on how to incorporate informal practices into formal systems while maintaining efficiency and trust.