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 

Valuing Migrants and their Money

By IMTFI Fellow Carol Chan

Migrants are often discussed positively in terms of their economic value and labor value to countries of destination and origin. In this blog post, I draw on my research with migrant-origin villages in Central Java, Indonesia, to challenge this impulse to foreground migrants’ “economic” motivations and contributions. I do so by highlighting the important ways in which ideas about appropriate gendered behavior, familial obligations, and religious piety, shape the value of migrants and their money. These ideas about gender and morality powerfully shape the transnational flows of migration. It explains why despite highly publicized risks and costs to migrants and their families in terms of finances, health, and mortality, hundreds of thousands of Indonesians continue to migrate annually.

In Indonesia, many programs aimed at improving the welfare of migrants and their families take the form of financial education programs, funded and facilitated by state institutions and foreign-funded NGOs. These encourage migrants—often with little formal education and living in rural poor areas— to finance their journeys from banks as opposed to borrowing informally from moneylenders and relatives, as well as send remittances digitally, rather than physically carry cash home. My project looks at the limited impact of these programs, by examining why migrants and their kin continue to take on many of these financial and physical risks. To do so, I examined attitudes towards migration more broadly, because they are intimately linked to how migrant money is valued, not only in terms of an economic exchange value, but also in terms of the gendered moral values associated with the production and circulation of money. 

Transnational Migration from Indonesia

Like many other migrant-source countries, migrants’ financial remittances to Indonesia exceed foreign financial aid and investment combined. Indonesia’s six million migrant workers thus contribute significantly to the national economy, and are hailed in everyday and public discourse as “foreign exchange heroes” (pahlawan devisa). However, Indonesian state and recruitment agents promote migration not only in its economic promises and advantages, but also in terms of gendered, moral, and religious or spiritual development—such as representing migration in terms of carrying out a patriotic or familial duty. 

In speeches by state representatives to women preparing to migrate, where women are given advice about financial behavior, their vulnerability to certain vices or temptations is emphasized. For example women are told to “resist” the seduction attempts of their employers, not be “wasteful or extravagant” by spending money on cigarettes, drugs, or “sit[ting] happily in clubs.” However, spending money on drugs or cigarettes is not framed in terms of migrants’ health, but in terms of reducing “the possibility that one can send money to families in the homeland.” In 2013, former chief of the National Agency for the Placement and Protection of Migrant Workers said, “Remember, if you consume too much, you will accumulate debt, and this isn’t good for your future, and your family.” Notably, such advice is rarely, if ever, dispensed to migrant men. Framing women’s migrations in terms of their familial and national duties encourages selective public sympathy and admiration only for migrant women who appear to conform to the normative ideal of a good Muslim mother, wife, sister, and daughter (See Chan 2014). But do migrant-origin villagers share such gendered evaluations of migrants and their money? What are the consequences of such evaluations? 

Evaluating Successful Migrants 

When I visited migrant-origin villages in Cilacap and Yogyakarta, dominant narratives and definitions of migrant success appeared predictable and standard: success was typically linked to migrant money, and status-linked indicators of being modern, such as fashion, the latest motor-bicycle, car, or concrete houses. Many told me that migrants should not return or should be “ashamed” of returning to Indonesia, if they have not yet saved enough money to bring home. Migrants do physically carry back as much cash as they have or can carry, up to as much as USD 5000. Villagers thus had very high expectations for migrants to both send money home regularly and save enough to bring home. For example, Diah was a factory worker in Malaysia for two and a half years. During this time, she managed to pay back all the debt she owed her recruitment agent (the equivalent of 9 full months’ worth of pay), and her remittances paid for her father’s medical operation, and her two younger brothers’ education. Nevertheless, she saw herself as a migrant “failure,” in comparison to other “successful” migrants who managed to return to buy land, build houses, and open shops. 

Diah’s situation is the norm for Central Javanese migrants, where remittances may pay for everyday necessities, and migrants do not always return with large amounts of savings to build big houses and buy land, unless they had been working for more than five years. However, for migrant women in particular, their money was evaluated not only in terms of the houses or land it can buy, but in also in moral terms of how the money was earned or spent in socially desirable or undesirable ways. Even in cases where migrants do fulfil the checklist of what a typically successful migrant should be, they may still perceive themselves, or be evaluated by resident neighbors and peers, to be “failures” or “not yet successful.” 

This is because narratives of women’s financial success often included suspicion or doubt about the source of such wealth. Such gossip might include how some women’s remittances were “not halal” (religiously forbidden), or “hot money.” Neighbors imply or explicitly speculate that these women earned extra money from sex work or received it from rich foreign boyfriends or extra-marital lovers. While there are women who do obtain wealth from these sources, it is very uncommon. Former migrants and non-migrants may make such judgments based on the way female migrants dressed when they returned, but sometimes such gossip may have no basis other than sheer incredulity that a woman can earn so much abroad. Scandalous stories in national media, or through informal Facebook posts online, which “expose” stories of Indonesians “trafficked” into sex work, or Indonesian sex workers in Hong Kong or Macau, encourage and perpetuate such stories and stereotypes. While the sources of migrant men’s wealth was never questioned, migrant women’s financial success was often suspect and associated with immoral means, unless they managed to maintain good reputations as respectful family members in the village. 

Evaluating Migrant Failures

A common example of a migrant failure is one perceived to not send or bring enough money home, that results in clear material indicators of migrant wealth. Diah, as mentioned above, is an example. In these cases, migrant men were accused of spending too much of their money on gambling, drinking, or commercial sex overseas— activities considered by most Central Javanese Muslims as associated with male vice and sin. These activities were seldom explicitly condoned by migrant-origin villagers in Yogyakarta and Cilacap, although they might be tacitly accepted or tolerated to varying degrees. As mentioned previously, migrant women were typically accused of spending their earnings on consumer luxury items, foreign boyfriends, cafes, or nightclubs. 

In these scenarios, I sometimes offered an alternative explanation for why migrants may not be sending much money home. Migrants might be paying off their debts to recruitment agents, who may charge them exorbitant interest rates. Some employers, especially in the case of female domestic workers, might choose to illegally withhold migrants’ wages, or in the worst cases, not pay them at all. In response, people often either shrugged off my suggestions dismissively, or reluctantly agreed that this may be the case. In general, migrants’ kin and neighbors, especially for those who have never migrated or attempted to migrate overseas, tended to downplay or not consider the financial costs of migration. They often expected that these costs would be quickly and rather easily paid off by the comparatively high wages abroad. In Diah’s case, for example, a non-migrant neighbour suggested that she was not able to save much money because she had been spending money frivolously on clothes and going out. This was despite the fact that she declared spending almost all her money on paying back her migration costs, and her family’s daily expenses. 

Concluding remarks

Migrants are often labelled in mutually exclusive categories such as “economic migrants” or “refugees.” While such distinctions may be practically useful in contexts such as facilitating documented mobility, many scholars have shown that the “economic” is intimately part of social, cultural, and political contexts that give money, mobility, and other currencies their value. In different contexts of risky migration journeys, migrants’ aspirations for a better life is intimately linked to what they can gain from sending money home. Nevertheless, the very attempt to migrate with the intention to seek a better life for themselves and/or their kin is also socially valuable, where the risk of failure has significant consequences for migrants’ social position and respect. 

Financial education programs and advice by the Indonesian state are not enough to address the question of why its migrants continually embark on risky journeys, and why not all manage to send or bring home much money. Instead, financial risks confronting migrants and their kin are strongly related to the broader migration industry with highly uneven processes and regulations, where borrowing money from an ill-reputed recruitment agent or carrying cash home can be perceived as only one among many “normal” risks entailed in migration. State institutions should begin recognizing that the problems facing migrant workers are not simply reduced to a few errant or “bad” recruitment agents and employers, or whether or not migrants are being frugal with their spending. Instead, the problems are institutionalized. Besides bargaining for better laws surrounding precarious labor, state, NGO and public programs about migration’s benefits and risks should focus on practical and infrastructural aspects of migratory processes, including remittance transfers, wage payment, and work conditions abroad, rather than questioning or applauding migrants’ financial discipline and moral character.

Read Carol Chan's Final Report.
Photos by author.