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Book Review: Understanding Hawala, Afghanistan's Informal Money Transfer System


Hawala, a system of informal money transfer based on trust that is practiced throughout the Muslim world, has received a large amount of negative attention after 9/11. It has come under considerable suspicion because it is used to transfer funds without a paper trail, which makes it difficult to trace those funds back to possible sponsors of terrorism.

Western security officials have connected hawala to terrorism financing because of its very nature, and have attempted to regulate it in countries such as Afghanistan. Media reports also have portrayed hawala as a system seemingly designed for the needs of terrorists because of its secretive, trust-based nature.

In her book, Trust is the Coin of the Realm: Lessons from the Money Men in Afghanistan, Edwina Thompson gives an in-depth and nuanced description of this system. She has focused on hawaladars, the men who take part in the hawala system, in an account that seeks to show what this system teaches us about Afghanistan more generally.

Thompson's full treatment of hawala -- both local Afghan and global aspects and the situation today and historically -- is the strength of this book. Such a thorough treatment of hawala, which might be considered one element of society, has not before been undertaken, especially with the intent of connecting it to so many other overlapping issues. And yet, this also seems to be the weakness of the book: no one aspect of hawala is accorded truly in-depth treatment.

Anyone who has spent time in Afghanistan is familiar with the hawaladars. These men can be found in any town in the bazaar changing money. In big cities, such as the capital Kabul, an entire section of the bazaar is dedicated to them. To an outsider, they might seem to be mainly engaged in the exchange of currencies; the money transfer system of hawala is not immediately visible or accessible.

Thompson presents examples of hawaladars’ positive contributions to society, such as providing funds for disaster relief, as well as the negative aspects, such as the funding of terror or insurgent activities. The latter uses of hawala are more widely reported and better known.

Thompson’s section on the historical background of the hawala system provides a look into its past in the Muslim world generally, and more specifically in Afghanistan. Hawala likely existed in some form before Muhammad lived, and was codified by Islamic jurists soon after his death. The spread of Islam throughout the world led to the spread of hawala, as it ensured trust and cultural connections among participants.

But in Afghanistan, according to Thompson, it has not operated entirely as an Islamic practice. The main hawaladar families were historically Hindu or Sikh, and were viewed as trustworthy despite being members of non-Muslim minority groups.

The years of continuous war in Afghanistan, starting with the 1979 Soviet invasion and continuing to the present, eventually led to the displacement of Hindus and Sikhs as the leading groups involved in hawala.

By 1992, the year the civil war began in Afghanistan, five out of seven Hindu and Sikh temples in Kabul had been destroyed and members of prosperous Hindu and Sikh merchant families had been murdered. Many members of both groups began to leave the country at this time. The few who remained experienced worsening conditions under Taliban rule, as women were forced to wear a long, yellow chador or scarf wrapped around their bodies to differentiate them from burqa- wearing Muslims, and households were marked by a yellow cloth draped above the door.

Ethnic Pashtuns mainly took over as hawaladars after most Hindus and Sikhs were displaced. These new hawaladars were more likely to become associated with violence, criminal activity or graft due to their associations with politicians and warring factions than were Hindus and Sikhs, with their greater social distance from the majority of society.

For readers interested in learning more about international money flows, the intersection of global and local politics and interests after years of war in Afghanistan, or non-Western institutions such as hawala, this is a fascinating book. It sheds light on a subject which was no doubt very difficult to research, and it does so in a way that avoids assigning a simplistic negative judgment to such a system by considering both the contributions and problems it brought to state-building in Afghanistan.

Trust is the Coin of the Real: Lessons from the Money Men in Afghanistan by Edwina Thompson (Karachi, Oxford University Press, 2011). Melissa Kerr Chiovenda is an anthropologist at the University of Connecticut.
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