Financial Inclusion: Integrating the Poor into the World Economy – A Look at Migrant Laborers in a Karachi Marketplace and How They Move Money

by IMTFI Fellow and International Board Member Noman Baig, Habib University

Vendor at Jodia Bazaar, Karachi 

My interest in money stems from the incidents of 9/11 in the United States. After the attacks in the US, all major governments and international organizations passed stringent laws against informal money transfer channels labeled as funding terrorism all over the world. In Pakistan, the state curtailed the illegal funds transfer channel known as hawala by arresting prominent currency dealers and passing the Anti-Hawala Act. A hawala channel is a monetary network/practice that relies on centuries-old kinship bonds for transferring value without moving physical cash from one place to another. In place of these informal and embedded monetary channels, the state opened up a market for multinational corporations such as Western Union and the branchless banking sector to integrate hitherto unbanked people into the gambit of modern finance under the national strategy called “financial inclusion.”

Despite the state’s coercive crackdown on moneychangers and moneylenders in the country’s local bazaars, the lower-income labor class continues to depend on such informal money channels to send and receive money. These personalized networks allow them to feel secure that the money will reach its destination safely. I conducted ethnographic research in Karachi’s marketplace, Bolton Market, the largest wholesale bazaar of a variety of commodities such as skin care, spices, fabric, steel, medicine, etc. While the merchant community was under the direct surveillance of the state security agencies, the laborers were freely moving their funds.

An archeology of funds transfer methods in Karachi’s Bolton Market

Bolton Market, Karachi 

During my research in these markets, I have discovered an archeology of funds transfer methods. I call it an archeology because there are layers of channels, often superimposed on each other, cross-cutting in many cases, and undermining each other at various intervals. It can be called a gradation of financial channels. For example, an informal hawala transfer made through a local money changer passes through a kinship channel, but at some point in a long chain the same transaction will intermingle with the formal banking system. If the transaction raises a suspicious activity report, then the Federal Investigation Agency (FIA) will examine it before the funds reach their final destination.

Jodia Bazaar, Karachi

Financial practices in Karachi’s marketplaces are a lattice work, convoluted, and rhizomatic, making the location of the sources of a transaction by the researcher a dizzying task. In just a single transaction the number of actors involved can include a number of players, such as banks, moneychangers, security agencies, merchants, etc. Sometimes transactions may include shrines, mosques, and charity organizations by virtue of the mere fact that the gift economy and commodity exchange are so tightly knit. Thus it becomes extremely difficult to neatly categorize and differentiate one method of financial transfer from another. In fact, it is also incorrect to use labels such as “informal market,” which according to recent estimates is 75-90% larger than the size of the “formal economy.” To be very clear, “informal” does not mean that the market operates haphazardly, randomly, or irrationally, though it is the kind of impression we generally get when we hear the word informal. In fact, the informal market, if it can be neatly categorized as informal, does not operate outside of the formal market. Both domains intermix with each other at multiple locations.

Bhandari’s story – Considering migrant laborers in Karachi

The research I conducted engages with these multiple methods of funds transfer. One of the channels often used by laborers in Bolton Market involves a kin-based network of largely Pakhtun migrant workers in Karachi.  One of the laborers who I became friends with is called Khan Zareen, also known as Bhandari in the market. Bhandari arrived in Karachi as a porter in the early 1980s. He started working in the city’s vegetable market (sabzi mandi) loading and unloading vegetables and fruit on his back. After the resettlement of the vegetable market to the outskirts of city, Bhandari decided to work in Bolton Market, where he started hauling heavy boxes to and from the warehouse.

Vendor at Jodia Bazaar, Karachi

My encounter with Bhandari was sudden and unexpected. One day while loading boxes on the cart to take it to bus station, he came to hear, rather incorrectly, from a shopkeeper that I was a journalist writing a story about the markets. Bhandari came rushing into the office and instructed me to write about his suffering and condition. “Our houses have been destroyed in Bajaur, and we never got any compensation from the government, while the landowners (malik) are constructing new palatial houses,” he said.  These were the first words that Bhandari uttered to me bluntly. Initially I responded to him by saying that I would tell his story, but that he would have to give me more details. As the days passed, we became friends. Every time I would visit Bolton Market, we would go to a chai dhabba (tea shop) for a cup of tea.

One day Bhandari showed me how he transfers money to his home in Bajaur. He took me to another Pakhtun porter, who is known as Laal Zeb. Bhandari handed over cash to Zeb and told him to deliver rice, ghee, wheat, and sugar to his home. Laal Zeb took the cash and called his brother in Bajaur who owns a food ration shop in the village. The next day, Zeb’s brother delivered the goods at Bhandari’s house. There were no fees or charges for any part of the entire transaction. Bhandari was able to buy food items for his family from Karachi, while Zeb collected the cash for his brother’s shop in the village. However, when Bhandari sends cash to the village via a moneylender/shopkeeper, he has to pay Rs. 30 for every Rs. 1000 (which is still half of what branchless banking services such as Easypaisa charge their customers). These are personalized networks operated mainly by village communities who are spread across rural and urban Pakistan. Porters such as Bhandari never go to the bank. Several years ago, with the aid of the state officials, he managed to open a bank account in a local bank branch in Bajaur to receive government compensation for the reconstruction of his house, but after several years the bank account is still waiting to receive funds from the government.

I asked him why doesn’t he use new services such as Easypaisa—Pakistan’s largest branchless banking network—to send money. He replied, “Easypaisa charges Rs. 60, while I pay Rs. 30 on every Rs. 1,000. Also nobody in my home can get to an Easypaisa shop, which is outside of the village.” In conservative tribal areas women are not allowed to go outside alone. Bhandari has no male family members living in the village; his two sons who are 22 and 14 also work in Karachi.

Although Easypaisa has become a phenomenal success among the laboring classes in Karachi, and in Pakistan in general, Pakhtun laborers in Bolton Market continue to use the old ways of sending and receiving money. They use personalized channels such as Laal Zeb not only to transfer value, but also to solidify affective bonds, social relationships, and ethnic ties. These symbolic values play a determining role in maintaining community boundaries. In an Easypaisa store, affective and ethnic relations are rendered unnecessary, while the rationalized market ethos of efficiency, security, and instant transaction takes precedence.

Vendor at Jodia Bazaar, Karachi

Laborers such as Bhandari constitute the majority of Pakistan’s working class who survive on less than $2/day. It is this sector of the population that is seen as existing outside of the “real” economy, the domain of modern, “formal,” rational, and bureaucratic finance propelled by identity cards, paperwork, written records, and a survivalist ethos. The recent financial sector development policies and practices are an effort to bring laborers like Bhandari under the umbrella of the state and the corporate economy through giving them easier access to savings, loans, and credits. One of the ways proposed to implement this is to initiate a network of branchless banking or retail agent banking. The state and corporations justify these efforts as a favor to laborers, a remedy for alleviating their so-called “miserable” conditions through the cure of financial inclusion.

Expanding the Discourse on Financial Inclusion

The agenda of financial inclusion to offer easy access to savings, loans, and credit to the masses, is fraught with inequalities and injustices. This is not to say that the laborers should cease using branchless banking. But to charge heavy fees for the services owned by a foreign corporation proves how terms of trade set during the colonial era continue to extract surplus value from the bones and flesh of the laborers. Most importantly, if international developmental organizations such as the World Bank are seriously interested in improving the financial conditions of the poor by bringing them inside of modern finance, then they should start by identifying the actual root causes of their exclusion. If they want to include these people, then the governments need to start a radical program of wealth redistribution through policies that allow its more even distribution. In other words, the poor masses all over the world are excluded because the wealthy few hold the wealth of 99 percent of the people. The majority will always stay excluded, and any financial inclusion program will fail miserably, unless a just economic system comes into place.

Laborers near Urdu Bazaar, Karachi

The discourse of financial inclusion therefore demands a critical scrutiny in light of the developmental ideology propagated in the postcolonial world. With the beginning of modern colonialism in the mid-eighteenth century, such efforts at integration and inclusion have resulted in an imbalanced power structure and income inequality at a global scale. For instance, in British India, colonial rule forced the integration of the vast land of the Indian subcontinent, and its markets, its weavers and peasants, into the international markets. The outcome was horrendous, and resulted in the siphoning of wealth and resources from the colonies to the metropolis. Thus this is not the first time that a serious effort at integrating the masses into the world economy has been undertaken. The postcolonial world has been experiencing such programs of integration for at least the last two hundred years, often with disastrous consequences.

Read Noman Baig’s Final Report, “Branchless Banking: Integrating Pakistan’s Poor in the Global Financial Circuit”

Stay tuned for a blogpost insights from "Financial Inclusion of the Poor workshop" in Karachi, Pakistan.

Photos credits: Noman Baig 

Home Economics: Accounting, Monetary Practices and Financial Flows

"Njangi Sociality: Mobility, ICTs, and Mobile Money Usages and Practices amongst Poor Rural Farmers in the Cameroon Grasslands" by Francis B. Nyamnjoh and Divine Fuh opened with Fuh telling a dramatic personal story about his own challenges growing up in rural Africa.  He described buying a cell phone for his mother and how it became a symbol of their evolving relationship, as he pursued higher education and an academic career.  As mobile phones became popular, he also saw his mother's life  begin to change, as she explored new economic opportunities, and this context brought to his scholarship an interest in "agency, precarity, sustainably, resilience." In collaborating with Nyamnjoh, he also described the importance of interdependence and intersubjectivity in their work, as they tried to capture the role of group interests and collective agendas.

His account included "communities of social conviviality" and their concern for school children needing support.  It was a narrative that included sales in the market, negotiations with police officers, patterns of consumption, and "how very young men build different kinds of interdependent relationships."  He placed these experiences in the framework of what Patrick Chabal has called "the politics of suffering and smiling."  In mapping out the vulnerabilities of the "ICT & Finance R-evolution," he noted that farmers without access to banking facilities were often shut out by structures that excluded his own grandmother and others with a need for formal papers. He argued that it was critical for researchers to think about being "not just interested in productivity" but also "how they defend cultural practices."

Sean Dowdy began his talk about "How 'the Poor' Account: Financial Reckoning and its Cosmoeconomics in Assam, India" by noting the fact that like the previous speaker he "also grew up on a farm," although his own relationship across distance with his family was vexed by "the post office and its inefficiencies."  In thinking about the IMTFI paradigm broadly to include "things that may not appear economic at all," such as spiritual and material prosperity dictated by the rules of gift and barter in a multiethnic community in the Mayong Kingdom, a fully functioning kingdom that is also known as a "country of black magic" in which being "poor" should be considered "in scare quotes," because the systems of "how they count" includes reckoning drawn from cosmology and relationships with powerful non-human entities in the group's understanding of "the shared account."

Dowdy demarcated the features of a Mayong worldview that was comparable to the following phrase from Heraclitus in its orientation: "Although the account is shared, most men live as though their thinking was a private possession." In this long view of reckoning known in Assam as "Hisāb Kore," the memory techniques of such cosmological accounting were analogous to tracing back to the mark of "footprint" at the beginning of history.  This form of reckoning had no double entry, but there were procedures for verification, because the shared account -- unlike "secret accounts" designed to protect against sorcery and accusations of witchcraft -- could be publicly audited and debated by the community. This belief system relied on the foundational assumption of a "transparency" of other minds, which constituted a kind of "telepathic ethics" where "even secret accounts are mired by a general social audit," because "others can manipulate your thoughts, your objects of value," so that "your thoughts and actions do not belong to you."

According to Dowdy, the work of reckoning is also "a form of making the cosmos legible, manageable, and prosperous."  He described concepts such as "the fine," which could be applied to cases of incest, and "sharing fifty-fifty."  He explained how the custom of giving the female offspring of an animal to a family in need on the assumption that the female offspring of those offspring would be eventually returned to the donor might result in an infinite deferral, as animals kept being given to the most needy parties rather than the parties "owed" as antecedents.  Dowdy also argued that these behaviors could be analyzed with the concept of ontography developed by Martin Holbraad.  (You can see a pop culture manifestation of ontography discussed by Ian Bogost here.)  In closing, he noted that languages that had the same word for "poor" and "sad" actually opened up the possibility for differences between those terms by placing them in opposition.

The case study on "Contingency Routes: Somali Financial Flows and Transnational Spaces between Kenya and Uganda" by Gianluca Iazzolino and Thomas Molony showed how researchers had to be resourceful when field sites turned into conflict zones.  Researchers were often "kicked out" by informants for asking questions that they didn't want to answer.  Iazzolino explained how their research that looked at "flows of people" and "flows of money" had been disrupted by several geopolitical events, including the attack on the Westgate shopping mall in Nairobi.   Although formal financial services structured by partnerships between financial institutions and telecommunications infrastructure providers, such as M-Pesa, were the "bread and butter of people working in this field," Iazzolino and Molony wanted to explore the triangle of "financial infrastructures," "livelihoods," and "mobility" without relying on trite financial inclusion narratives, so they chose to think about how mobility might range from acquiring a foreign passport to fleeing as a refugee for Somalis along the "Eastleigh-Kisenyi" corridor that spans from "Little Mogadishu" in Kenya to similar settlements in the slums of Kisenyi in Uganda.

With the stabilization of Somalia, the country's citizens were also exploring potentially lucrative business opportunities in South Sudan, but "volatile times affected decision-making," and the the denizens of the corridor were faced with the possibility that U.S. currency might be limited only to banks and that global finance giant Barclay's might punish Dahabshiil for providing "Hawala" transfers of large amounts of cash with no ID required in a low interest credit/debt system that might fund terrorism as easily as family obligations.  Of course, since Hawala is a "set of practices" rather than a formal business enterprise with a corporate identity, it could never be shut down.

Iazzolino described the corridor as a place of "low-end globalization" that also demonstrated the viability of the "south-south networks" described by Gordon Mathews.  If transactions were "safe" and "private," there could be both pros for women and cons for elders trying to enforce social norms.  In charting out Hawala/M-Pesa relations, rather than envisioning replacement, Iazzolino described an "informal inter-operability" of cash advances and cash floats including quick loans from relatives that might be preferable to formal market exchanges.  The constellation of participants that he enumerated included market wholesalers, proprietors of various businessses, money vendors, investors, and post agents.  He observed that there were both "gendered values" in which mobile money was considered to be "closer to women and school children" and a "temporal axis" that even included "turning aid money into business money."  The emphasis for Somalis was always on "portability," from wearable gold for women to livestock that could cross borders and boundaries for men.  

Discussant Olufunmilayo B. Arewa of UC Irvine asked how technology figured into the accounting process and into social networks if financial reckoning was imagined broadly.  She also moderated discussion in the question and answer session about the question of inclusion and what Dowdy called the "means to share."  In the collective conversation Iazzolino claimed that distinction between formal and informal "not very useful in the empirical realm."  One audience member described it as a panel about "family, community, and sharing" and the concepts of morality that might differ from narratives of development or financial policing.