Crowding Out Trust in the Informal Monetary Relationships: The Curious Case of the Hawala System

Alexander Lascaux

Forum for Social Economics, 2015, vol. 44, issue 1, 87-107

Abstract: Trust, along with other influential norms of cooperation, has been traditionally viewed as an important coordination mechanism stabilizing expectations of the participants in the informal economic exchanges. Drawing on the example of the informal value transfer system called hawala, this paper, however, shows that the role of safeguard against opportunism in the informal monetary settings is much more reliably performed by the instruments of social control. Norms of control embedded in community beliefs and common social practices among the hawala members entirely replace trusting attitudes, rendering them superfluous for the purpose of protecting financial interests of clients and intermediaries in this informal system of monetary exchanges.

Date: 2015
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DOI: 10.1080/07360932.2014.954250

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