hundi: an informal remittance transfer system in asia

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THE SOCIAL ORGANIZATION OF HUNDIMd Mizanur Rahman; Brenda S. A. Yeoh

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THE SOCIAL ORGANIZATION OF HUNDI

Channelling migrant remittances from East

and South-east Asia to Bangladesh

Md Mizanur Rahman and Brenda S. A. Yeoh

The informal funds transfer system found among South Asian migrant workers in general and

Bangladeshi migrant workers in particular in the major labour-receiving countries of East and

South-east Asia is popularly known as hundi. The hundi is informal but highly organized and

founded on social infrastructure comprised of social and symbolic ties. Existing literature tends to

highlight formal remittance channels and is underwritten by either economic or security concerns.

Focusing on the social dimensions of the hundi as an informal funds transfer system and the

recent security implications of the hundi system, this study examines the operations of and social

relationships embedded within the hundi system in the context of East and South-east Asia.

Drawing on the experiences of a Bangladeshi sending village as well as four destination countries

in East and South-east Asia, this study reports that there are three phases in hundi transactions:

the first mile, the intermediary stage and the last mile. The hundi is adopted and transformed

through reciprocity. The system is composed of a web of interconnecting social relationships that

supports the transfer of migrants’ savings internationally. We find reliability and credibility as

essential ingredients to a hundi business and these are maintained through social sanctions. The

study suggests that migrant workers’ right to use a cheap and convenient service should be

facilitated.

KEYWORDS: hundi; remittances; informal channel; East and South-east Asia; Bangladesh;

migrant workers; transnationalism; labour migration; foreign workers

Introduction

The transfers in cash (or kind) from migrants to their non-migrating families in the

source countries are usually referred to as ‘migrant remittances’.1 Migrant remittances are

currently second only to foreign direct investment and are significantly larger than official

development assistance in a number of developing countries (Ratha 2003). Between 2001

and 2005 international migrant remittances’ flows increased by 58 per cent, to reach about

US$ 232 billion (World Bank 2006, p. 88). With about US$ 167 billion, developing countries

received the biggest share, while industrialised countries in North America and Western

European countries are the major sources (World Bank 2006, p. xiii). The true value of

remittances, however, is likely to be much higher because this official account does not

capture informal remittances (Abella 1989). One source estimates informal remittances as

between US$ 100 and US$ 200 billion a year (Sander 2003, p. 4) while another puts the

figure between US$ 200 and US$ 300 billion a year (Migrant Remittances 2004, p. 1). The

Asian Population Studies, Vol. 4, No. 1, March 2008ISSN 1744-1730 print/1744-1749 online/08/010005-25– 2008 Taylor & Francis DOI: 10.1080/17441730801963490

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flow of this huge amount of remittances demands a systematic inquiry into the channels

through which remittance is transferred across international borders.

Broadly, we can identify two types of funds transfer channels: formal and informal.

Within formal channels, the institutions involved in money transfers are supervised by

government agencies and laws that determine their creation, characteristics, operations

and closure (APEC 2003, p. 3). Formal systems include banks and postal services, money

transfer operators (MTOs) and other wire transfer services, and credit unions. The formal

system is often criticized for high transaction costs and exchange loss. For example, the

World Bank estimates that the average cost of transferring remittances in a formal system

is about 13 per cent and sometimes exceeds 20 per cent of the amount remitted (Maimbo

et al. 2005, p. 5). However, an informal funds transfer channel ‘exists and operates outside

of (or parallel to) conventional regulated banking and financial channels’ (Buencamino &

Gorbunov 2002, p. 1). Informal funds transfer systems have long been in existence

(Udovitch 1970; McPherson 1993). Initially used as part of trade and commerce, they were

also drawn upon by early migrants to transfer savings (Aggarwal 1966; Wu 1967; Hicks

1993; Sandhu & Mani 1993).

Presently, informal systems exist in different countries in different names and forms,

for example, hawala (India, Pakistan and the Middle East), hundi (Pakistan and Bangladesh),

fei-ch’ien (China and South-east Asia), chit (China), chop (China), hui kuan (Hong Kong),

padala and paabot (the Philippines), phei kwan (Thailand), chuyen tien tay ba (Vietnam),

kyeyo money (Uganda), and mali a mbeleko (Zambia) (see Passas 1999; Bezard 2002; APEC

2003; Mellyn 2003; Maimbo & Passas 2004). The kind of informal funds transfer system

found among South Asian migrant workers in general and Bangladeshi migrant workers in

particular in the major host countries of East and South-east Asia is popularly known as

hundi. The hundi is informal but highly organized and founded on social infrastructures

comprising webs of relationships based on kinship, friendship, and regional networks. In

the existing literature, the term ‘hundi’ is used in relation to the ‘hawala’ system found in

the Middle East and South Asia (Passas 1999; Lambert 2002; Thieme 2003; Ballard 2005).

However, the operations and characteristics of the hundi as found in East and South-east

Asia are different in many respects from those of the hawala or other forms of informal

funds transfer methods found globally.

Some variations of hundi operations among countries in East and South-east Asia are

visible and they are mostly attributed to macro-factors such as immigration policy,

financial regulations, geographical proximity and clustering of migrant workers across

national territory of the concerned countries. We can broadly identify two key players in

the hundi system: hundiwala and hundi dealer. Hundiwalas are usually migrant

entrepreneurs, who possess certain entrepreneurial qualities and specific social ties that

provide the basis to seek access to the migrants and their families at home and abroad.

They are physically involved in the collection of cash from migrant workers overseas, and

in the carrying and distribution of cash to the migrants families back home. In contrast to

quasi-similar types of individuals such as the mulas who tend to be only carriers of funds

and American goods to Cuba in the case of US-Cuba remittance systems (Orozco 2002a),

the services that hundiwalas offer are much wider and go beyond the economic

transaction of funds. Hundi dealers are big funds operators, who are usually situated at

the node of regional financial activities such as Singapore and are involved in the transfer

of large funds.

6 MD MIZANUR RAHMAN AND BRENDA S. A. YEOH

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The hundi system possesses several distinct features that account for its widespread

use in this region. It includes benefits such as cost-free transaction, door-to-door service,

speedy delivery, cultural convenience, and social rewards for trustworthy participants.

Hundi is considered as a means to reproduce social power and status in the village social

structure. The hundiwalas often enjoy non-economic pay-offs in terms of gaining social

status and power in the migrants’ communities of origin, over and above economic profits,

resulting in the social bases of sustainability of the system. Reliability and credibility of the

hundi are maintained through social sanctions. If these are compared and contrasted with

the formal funds transfer systems in developing countries, which are often plagued by

high transaction costs, long processing, exchange loss, and last but not least, overly

bureaucratic procedures (see also APEC 2003; El Qorchi et al. 2003), it becomes evident

why migrant workers prefer to use hundi system to remit their hard-earned earnings. The

role of different socio-economic groups, such as businessmen, students, and medical

tourists, is also important in the commercial viability of the system because they borrow

funds from hundiwalas overseas for their own uses.

However, the functioning of the hundi system has been severely affected by the

recent securitization drive. Migrant remittances have been a subject of security concern

especially after the 9/11 terrorist attack (Ratha & Kethar 2004; FATF 2003; Burbidge 2004;

Howlett 2002). After 9/11, substantial literature has emerged on remittance-transfers2

(Orozco 2002a; Vadean 2007; Ballard 2004a; World Bank 2002). A survey of the current

literature shows that the discussion has tended to focus on: (i) an elaboration of different

remittance channels; (ii) the disadvantages of the different informal remittance mechan-

isms for national economies; (iii) linking informal transfers with drug dealing and terrorist

financing; (iv) the securitization of remittances; and finally, (v) policy recommendations on

how to increase funds transfer through formal channels, that is, how to ‘bank the

unbanked’. Thus, the overall tone of the existing literature is characterized by economic

and security concerns.

While the existing literature advances our understanding of remittances from the

economic perspective, research is needed in the area of the social dimensions of

remittance-transfer. Apart from this, little is known about the problems associated with

increasing securitization of remittances and the trade-off between such concerns and the

convenience of informal channels of transfer. Focusing on the social dimensions of the

hundi as an informal funds transfer system and the recent security implications on

the hundi system, this study attempts to fill this gap. Broadly, this paper examines the

operations of and social relationships embedded within the hundi system in the context of

East and South-east Asia.

The next section outlines the scope of the study and research methodology. This is

followed by the analytical framework for this study based on migrant network theory, and

a discussion on Bangladeshi labour migration to East and South-east Asia and the

institutional framework for fund-transfers to Bangladesh. Subsequent sections give

emphasis to the social infrastructure of the hundi system, and, by drawing on the

experiences of a Bangladeshi village as well as four destination countries for Bangladeshi

migrant workers, the paper explores the raison d’etre behind the popularity and resilience

of the hundi system. In the conclusion, we raise the fraught question of whether there is

any evidence for a relationship between undocumented migration and informal

remittance channels.

THE SOCIAL ORGANIZATION OF HUNDI 7

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Scope and Research Methodology

As funds transfer involves destination and source countries, this study undertakes a

multi-sited research methodology linking both ends. Focusing on Bangladeshi migrant

workers in East and South-east Asia, the research was conducted in Bangladesh as well as

four destination countries*Japan, South Korea, Malaysia and Singapore*of significance

in terms of the resultant remittance inflows through the hundi system.

International labour migration in Bangladesh tends to originate mainly from rural

areas.3 To understand the social bases of hundi, we therefore conducted fieldwork at a

predominantly South-east Asian migration source village, Gurail in Tangail district, situated

roughly 60 kilometres away from Dhaka, capital of Bangladesh. The migration history of

this village dates back to the 1980s. In the late 1980s, some enterprising individuals

migrated to Singapore and Malaysia for work and became pioneers of the development of

network-based migration patterns in Gurail and nearby villages. Presently, around two-

thirds of families in Gurail have at least one member in East or South-east Asia and are

mostly dependent on remittances for their livelihood. We focused on Gurail’s basic social

units and the principles for forming and maintaining these groupings to illustrate the

social basis of remittance transfers. This community approach provides insights into the

complexities of the remittance process in Bangladesh.

Fieldwork in host countries involved, in each country, focus group interviews with

migrant workers as well as interviews with individual workers for information about their

personal experiences which they could not reveal during the focus group interview. We

also interviewed some primary and secondary hundiwalas in all four countries studied, as

well as talked to the owners of ethnic stores as many of them are engaged not only in

hundi collection but also in procurement of Bangladeshi goods through hundiwalas. This

has provided us a better way to understand the differences regarding the factors that

determine the relative preference for hundi over formal remittance channels and the

observed variations in the situations and practices of hundi. The fieldwork was conducted

over a period of three months from 2004 to 2005. The strength of this research lies in the

attempt to document the hundi process as a whole by focusing on both home and host

countries rather than by centering on either home or host country only. However, we

would like to acknowledge the fact that the duration of fieldwork was limited by financial

and time constraints, and that this precluded more in-depth fieldwork in certain respects.

Hundi and Migrant Networks

Migrant networks are usually defined as sets of interpersonal ties that connect

migrants, former migrants and non-migrants in the origin and destination areas through

ties of kinship, friendship and shared country origin (Massey & Espana 1987; Massey et al.

1993; Gurak & Caces 1992). Research have not only shown how migrants are linked to each

other through social networks but demonstrated the importance of these networks as the

social infrastructure that sustains the migratory process over time (Massey & Espana 1987;

Boyd 1989; Faist 2000). Migrant networks serve many important functions for their

members including conveying information, providing financial assistance, facilitating

employment and accommodation, and giving support in various forms (Massey et al. 1993;

Arango 2000; Choldin 1973). As migrant networks demonstrate feasibility, reduce the

expected costs and risk and increase the expected benefits of migration, they have been


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widely used to explain perpetuation of migration at the intermediary level. Apart from

supporting the mobility of labour, migrant networks also facilitate the transfers of migrant

remittances*a phenomenon that has been given far less scholarly attention.

Migrants and hundiwalas are embedded in a social-relational context characterized

by social ties, ‘a continuing series of interpersonal transactions to which participants attach

shared interests, obligations, understanding, memories and forecasts’ (Faist 1997, p. 199).

The strength and content of social ties that bind thousands of Bangladeshi migrants with

hundiwalas into a social and business web are crucially important for understanding the

endogenous dynamics of hundi bonds. Scholars have identified three forms of relation-

ships in migrant networks: obligations, reciprocity and solidarity (Faist 2000). They bind

prospective remitters and network based remittance service providers in an exchange

relationship. Obligations and reciprocity work in the hundi process because each

successful hundi strengthens the bond between migrant worker and hundiwala and

provides a condition for durable exchange relationship. Solidarity is based on inter-

personal and imagined ties that mobilize migrants in favour of remitting through some

particular individuals over others.

Migrant networks constitute a valuable form of social capital that individual

migrants often draw upon during their migratory life to obtain different types of

network-based services (Massey & Espana 1987; Portes 1995). Hundi service can be one of

them. Social capital serves to connect individuals to networks and collectives through

affiliations (Faist 1997). Social capital thus has a dual role: it facilitates cooperation

between individual actors in creating trust and it links individuals to social structures (Faist

1997, 2000). For the hundiwalas facilitating the delivery of funds, migrant networks enable

a lucrative business. Hundiwalas benefit through monetary or social debts incurred during

the process of remittance transfer. Continued participation in network relationships

renews and maintains the bonds between migrants and hundiwalas. In hundi dealing, trust

in the hundi system or ‘hundi trust’ is vital for its sustenance, hence hundiwalas use social

and symbolic ties to garner hundi trust. It is important to note that hundi trust does not

exclusively derive from social and symbolic ties in the communities of origin; it may also

stem from the relationships that may evolve in the course of migration and the common

experience of life in the destination country.

There are some similarities between hundi bonds and guanxi bonds. The Chinese

word ‘guanxi’ refers to the concept of drawing on connections in order to secure favours in

personal relations. It contains implicit mutual obligations, assurances, and understanding

and governs Chinese attitudes toward long-term social and business relationships (Yang

1994; Ying & Walker 2006; Yadong 2000; Willard 1997). Hundi bonds also rely on similar

forms of mutual trustworthiness. We identify two interlocking components in hundi bonds.

The first component is the right of each person to request performance implicit in the

bond. The second component is the obligation to repay. The failure to reciprocate favours

results in the loss of one’s network and the multiple resources embedded in it. Migrant

networks not only provide a fertile ground to develop trust-based services; they also

compel members to uphold the trust through social sanction mechanisms. This is because

migrant networks link migrants and network-based service providers to their origin values

and norms, the same social sanctions that discourage breaching trusts and commitments

in network-based transactions.

Emphasizing the role of migrant networks does not mean neglecting the role that

business networks play in the remittance process. Business networks in remittance services


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work in collaboration with migrant networks. While migrant networks may usually be

involved in the collection and distribution of funds, business networks make use of funds

efficiently for profit within a given short span of time and therefore contribute to the

commercial viability of the system. Table 1 presents some general features of the hundi.

TABLE 1

General features of Hundi.

Terms Descriptions

Hundi characteristics Administrative charge-free service, no foreign exchange manipulation,door-to-door service, speedy service, and cultural convenience.

Key hundi players Hundiwala and Hundi dealerHundiwalas Primary and secondary hundiwalas: primary hundiwalas are defined as

persons who often move between host and home countries to deliver cash.Secondary hundiwalas are defined as persons who stay in the countryconcerned. Both hundiwalas take the responsibility of distribution of cashsafely to the migrant families.

Hundi dealers Based usually in regional financial hub, Singapore, and engaged in thedealing of large amount of cash for profits. They do not take responsibilityof distribution of cash to migrant families. They only take the responsibilityof safe transfer of cash to the home country.

Hundi trust Sending-end hundi trust and destination-end hundi trust. In sending-endhundi trust, migrant workers pay cash to the hundiwalas based on priorhome-based relationships (social and symbolic ties). In destination-endhundi trust, migrant workers pay cash to the hundiwalas based onrelationships developed in the course of migration in destination end.

Restoration of trust Sending-end based social control mechanisms like traditional authority;destination-end based social control mechanisms like fear of refusing theservices of hundiwalas by migrant communities. Sometimes, bothsending-end and destination-end social pressures are used to restore thehundi trust.

Collection It is the hundiwalas � primary and secondary � who are involved in thecollection of cash from migrant workers. Primary hundiwalas collectdirectly from migrant workers and sometimes take help of secondaryhundiwalas to collect money as found in Malaysia, South Korea and Japan.Primary hundiwalas sometimes pay a portion of the cash to the hundidealers with profits and safe transfers to home country. Secondaryhundiwalas sometimes also pay cash to hundi dealers for profit and safetransfer to home country.

Uses of hundi money Trade, uses by socio-economic groups (e.g. students, medical tourists),transfers to third country because of the strict financial regulation inBangladesh, and luggage business.a

Distribution Primary hundiwalas visit migrant families to deliver cash on a regularbasis. In the case of hundi dealers, migrant families visit the hundi dealer’sagents based mainly in Dhaka. Sometimes, primary hundiwalas collectmoney from the hundi dealer’s agents in Dhaka and visit the migrantfamilies to pass them the cash. Secondary hundiwalas who transfer cashdirectly from the help of hundi dealers, employ agents in Bangladesh tocollect cash from the hundi dealer’s agent based mainly in Dhaka and thendistribute cash to the migrant families back home.

Hundiwala’s profits Economic and non-economic pay offs

aIn the ‘luggage business’, individuals fly to another country to buy goods and return home with thosegoods in their luggage to sell in the local market. Such businessmen can make a profit by evading tax andchoosing high value goods that can be sold at high profits in the home country.


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Figure 1 presents a prototype hundi transaction found in East and South-east Asia

and is elaborated further in a later section. Figure 1 is broadly divided into three phases:

first mile, intermediary stage and last mile. We have borrowed the terms ‘first mile’,

‘intermediary stage’, ‘last mile’ from Hernandez-Coss (2005), who used the terms to explain

the Canada-Vietnam and the US-Mexico remittances corridor sponsored by the World

Bank. The first mile of the remittance process includes collection of remittance funds in the

host country, the intermediary stage indicates uses and transfer of funds, and the last mile

indicates distribution of funds in the home country. We have suggested that hundi is not a

unidirectional medium of funds transfer as found in the context of other informal

remittance channels, but bidirectional in which funds and goods are transferred from first

mile to the last mile and commercial goods for sale and gifts for migrant workers overseas

are carried from the last mile to the first mile.

Migrant Workers in Host Countries: Singapore, Malaysia, South Korea and Japan

Hundiwalas:Collection Point in Host Country

Migrant Families in Bangladesh

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Hundiwalas or Hundi dealersDistribution Point in Home Country

Transfer of Funds to Hundi

Dealers:

Singapore is the Regional Hundi Hub

Transfer of Funds to Businessmen: Business under-invoicing

FIGURE 1

Hundi operation: channelling remittances from East and South-east Asia to Bangladesh.


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Figure 1 presents two types of hundi players in the region*hundiwalas and hundi

dealers. Hundiwalas play a pivotal role in micro-hundi dealing and hundi dealers in macro-

hundi dealing. Hundi dealers are fundamentally users and transferers of cash. Some

enterprising migrant workers as well as hundiwalas act as facilitators and collaborators in

the collection of cash for hundi dealers. In macro-hundi dealings, a client in country X

hands over a sum of money to the hundi dealer and requests that the equivalent amount

be sent to a designated recipient in country Y. The sending hundi dealer relays all the

necessary information concerning the transaction to a counterpart hundi dealer in country

Y. The hundi dealer in country Y will give the money to the recipient upon presentation of

some sort of identification (resembling Hawala, see Monsutti 2005; El-Qorochi et al. 2003).

In this transaction, money is transferred between two parties living in two different

countries but neither hundi dealers nor cash necessarily cross borders.

Labour Emigration and Remittance Flows in Bangladesh

Experiencing a huge surplus of labour and economic stagnation immediately after

its independence in 1971, Bangladesh has pursued an active policy to facilitate

international labour migration for its nationals. The country has entered in the labour

markets of oil-rich Middle Eastern countries as early as the mid-1970s. Soon after

occupying the Middle East market, Bangladesh targeted the comparatively developed

economies of East and South-east Asia.4 By early 1990s, thousands of Bangladeshis started

to migrate for work to the countries of East and South-east Asia, for example, South Korea,

Malaysia and Singapore. In addition to the government’s initiatives, Bangladeshis also

joined in the labour market of these countries through personal initiatives. In the last

decade, around 200,000 Bangladeshis migrated annually through the official channel (see

Lian & Rahman 2006). According to available data, the total cumulative figure for

Bangladeshi documented migrants overseas until 2007 was approximately 4.5 million, and

for East and South-east Asia alone, it was roughly half a million.5

Japan is not a formal recipient of unskilled migrant workers. However, given

loopholes in legal mechanisms, since 1980 many enterprising Bangladeshis have entered

Japan by using tourist, student, business or transit visas and later overstayed to work

indefinitely. Some Japanese sources revealed that between 1990 and 1998, there were

63,170 Bangladeshi over-stayers (Watanabe 1998, p. 246). Recorded remittances between

1991 and 2005 amounted to US$ 414.09 million (Table 2).

Bangladeshis started to migrate to South Korea in the early 1990s under the trainee

programme called ‘Foreigners Industrial Training Programme’ (FITP). According to a

Bangladeshi source, Bureau of Manpower Employment and Training (BMET), only 11,165

trainees between 1994 and 2004 went to South Korea for work. However, the Organization

for Economic Cooperation and Development (OECD) report (2000, p. 211) revealed that the

cumulative figure for Bangladeshi over-stayers in South Korea between 1992 and 2000 was

69,600. This inconsistency in data is mainly due to the clandestine nature of migration. The

recorded remittance from South Korea was only US$ 2.27 million from 1991 to 2005 (Table 2).

Formal recruitment of Bangladeshi migrant workers in Malaysia started in the early

1990s. According to one source, between 1992 and 1998, 307,000 Bangladeshi migrant

workers were issued work permits to work in Malaysia (Athukorala & Manning 1999, p.

177). The amount of recorded remittances between 1991 and 2005 was US$545.31 million

(Table 2). Similarly, large scale migration of Bangladeshi migrants to Singapore also started


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TABLE 2

Country-wise and year-wise remittances earned in million US$.

Year

Country 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Total US$

Japan 81.90 49.73 30.41 32.76 27.69 24.7 0.98 29.98 45.16 16.09 11.60 15.13 18.78 19.18 10.76 414.85Malaysia 4.78 27.45 71.56 72.70 22.47 71.28 57.22 45.56 31.85 49.14 33.51 35.38 22.41 545.31Singapore 1.90 37.83 2.42 2.32 3.78 5.10 66.45 12.16 11.28 10.53 8.15 25.26 28.92 35.34 55.98 307.42South Koreaa 1.26 1.01 4.80 2.27

Source: Compiled from official data, Bureau of Manpower Employment and Training (BMET) http://www.bmet.org.bd/Reports/countrywiseremittance.htm (accessed 7 May2007).aRemittance inflow from 1991 to 2001 is not available on official record.

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in the early 1990s. There are approximately 50,000 Bangladeshi migrants in Singapore in

any given year since the mid-1990s (Rahman & Lian 2005). The amount of recorded

remittances between 1991 and 2005 was around US$ 307 million (Table 2). According to

official data, Bangladesh received around US$ 40 billion from its nationals overseas as

remittances between 1976 and 2006.6 Formal funds transfer systems in Bangladesh

include banks, MTOs and postal services. Bangladesh Bank,7 as the central bank of the

country, permits other banks to establish drawing arrangements with foreign banks and

exchange houses for facilitating remittance flows from Bangladeshi nationals living abroad

(de Bruyn & Kuddus 2005, p. 30; Siddiqui & Abrar 2003; Ullah & Panday 2007).

Bangladeshi banks began their operations in East and South-east Asia in the 1990s.

Some banks that have arrangements with foreign banks and exchange houses in East and

South-east Asia are Sonali Bank, Janata Bank, National Bank, Agrani Bank, Islami Bank and

United Commercial Bank. Transfers of money from these countries usually take from weeks

to months. Some migrant workers are found unhappy with long delays, corruption and

unfriendly attitude of Bangladeshi bank officials in these countries (see also The Daily

Ajkerkagoj 4 May 2005). Another important player in formal funds transfer systems is MTOs.

They provide speed service but charge higher fees. Western Union and MoneyGram are

examples of two major MTOs. Migrants can transfer money to more than 225,000 Western

Union Agents located in over 195 countries and territories worldwide.8 MoneyGram is

operating in 170 countries worldwide and have 75,000 local agents. The MTOs presently

cover major district cities in Bangladesh. Another potential method of funds transfer is

postal services. However, it is not popular among Bangladeshi migrants overseas.

The data on informal remittances are sketchy. Mahmud (1989) reports that informal

remittances account for 20 per cent of the total amount of remittances in Bangladesh

(cited in Puri & Ritzema 1999, p. 8). Siddiqui and Abrar’s (2001) study on labour migrants to

the United Arab Emirates revealed that 40 per cent of remittances were channelled

through informal means (cited in de Bruyn & Kuddus 2005, p. 29). An International Labour

Office (ILO) study on remittances in Bangladesh revealed that 10 out of 100 remittance-

receiving families faced problems with the hundi, whereas nearly twice the number (19

people) encountered problems with official transfer methods (van Doorn 2002/4, p. 50).

Ullah and Panday (2007) recently conducted a survey on Bangladeshi migrant workers in

Malaysia and Hong Kong (n�126) and found that only seven per cent of migrants from

Hong Kong and some six per cent of migrants from Malaysia sent remittances through

formal channels. According to a recent Asian Development Bank (ADB) report, 70 per cent

of total remittances from Singapore to India, Bangladesh, and Sri Lanka go through

informal channels commonly known as hawala and hundi (ADB 2006, p. 43). It is thus

obvious that a large amount of remittances enters the country informally. Among the

informal funds transfer systems, the hundi is a popular vehicle of funds transfer among

Bangladeshi migrants. Some other traditional informal systems that are used include hand-

delivery and hand carriage.

Case Study in Home Country

Hundi in Gurail: Role of Social and Symbolic Ties

The multi-layered relations that exist between hundiwalas and migrants and their

non-migrating family members are of paramount importance in forming the social basis of


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hundi. The relationships are complex, and understanding them requires an elaboration of

some of the basic spatial and social groupings in Gurail and the principles for forming and

maintaining these groupings. Our aim here is to explain the bases of cooperation and

mobilization of resources in a situation of migration and remittances in rural Bangladesh.

Gurail’s major social groups include the family (paribar), gusthi (lineage), and samaj

(community). These parallel the physical divisions of ghar (home), bari (collection of

families), and para (hamlet or locality) (see Bertocci 1972; Rozario 1992; Wood 1994; Kuhn

1999; Gardner 1995). The most basic grouping is the family. The family is usually defined as

a group that shares property and eats together from the same hearth (Rozario 1992). The

second important social group is the bari, which usually stands for a group of families

sharing the same courtyard. In general, baris are components of a larger group such as the

gusthi or para.

The term gusthi refers to the group of kin who trace their descent from one male

ancestor. Para is a spatial grouping that means neighbourhood. Individuals are usually

known to the outside para as members of particular bari. Generally, the name of the

lineage is the name of the bari. However, sometimes names of the bari change with the

outstanding achievements of bari members. For instance, some of the baris in this village

and neighbouring villages are popularly known as the Singapore bari, Malaysia bari, and

Korean bari. This means that someone from these baris must have migrated to the

countries concerned. Thus, international migration functions as a source of new identity

for oneself and one’s family and bari. Outside of kinship ties, esthanio9 and attiyo10 are

particularly important (Rahman 2004). People in their day-to-day life use these terms to

indicate the relationship and responsibility that goes with it. The term ‘esthanio’ implies

common origin or being from the same place and an esthanio is someone from the same

community of origin. In the migration literature, we find similar group ‘paisanaje’ in the

context of Mexico (Massey & Espana 1987). The term ‘attiyo’ indicates the broader kin

relationships.

The closest bonds outside the family, attiyos and esthanios are friendship between

people of roughly the same age. Although initially concentrated among persons of the

same age, friendships gradually became inter-generational, as migrants of all ages are

drawn together by the common experience of life overseas. Important friendships are

formed with fellow migrants beyond the esthanio category, embracing people from other

administrative units like the district, through the shared experiences of working overseas.

In this way, interpersonal relationships within the migrant networks are extended beyond

those possible through kinship, local friendship and esthanio alone. The bonds of these

social ties do not lose their importance; in fact, they are augmented by new relationships.

In contrast to social ties, symbolic ties can be mobilized even in the absence of earlier

direct contact. Symbolic ties are perceived bonds forged by face-to-face interaction, or

even indirectly, to which participants attach shared meanings, memories, future

expectations and representations (Faist 2000). Among the migrants in East and South-

east Asia, it is found that they usually form symbolic ties based on the district of origin

which often overlaps with social ties formed during the course of international migration.

Formation of Hundi Networks

To understand how migration and the subsequent hundi system developed in a

remote village like Gurail, we need to focus on the history of migration in Gurail.


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Emigration from Gurail changed from a trickle to a flood after a few men migrated to

South-east Asia as early as 1988 (Rahman 2004). The first few migrants returned and on

subsequent trips initiated others into the migration process. Every new migrant created a

new connection to the region. As more people migrated, the number of connections

rapidly expanded and the quality of the ties also improved as people had already learned

to adjust to life overseas. In-depth interviews with 12 early migrant workers in 2001

revealed that they assisted 101 migrants by providing both financial support and

information and another 182 migrants by providing either financial support or information

in their total working period in Singapore (Rahman 2004). Thus, all that is necessary for a

migrant network to develop is for one forerunner migrant to be in the right place at the

right time and to hold a position that allows him to distribute favours to others from his

community of origin.

One of the early migrants from Gurail was Asor Mia, who first worked as a

construction worker and later as a middleman for recruitment and occasional hundiwala.

Asor Mia is believed to be the first person who introduced the hundi to the villagers in the

early 1990s as migration for work generated foreign earnings that needed to be carried

back home. In the late 1990s, there were few hundiwalas who served Gurail and other

nearby villages as primary hundiwalas. In our case study in 2005, we found two primary

hundiwalas, who were serving Gurail and neighbouring villages by carrying remittances

from Malaysia, Singapore and South Korea on a regular basis. In addition to these primary

hundiwalas, we also found some secondary hundiwalas who were working for some other

primary hundiwalas based in nearby towns, Mirzapur and Tangail. As we have mentioned

earlier, hundi trust also stems from the relationships that may evolve in the course of

migration in the destination country. In the case of destination-end hundi trust, these

secondary hundiwalas are simply couriers*who carry cash and/or goods from primary

hundiwalas to migrant families and vice-versa.

Operation of Hundi

Both hundiwalas identified here were early migrants in the locality. One of the

hundiwalas had 15 years of migration experience in Asia comprising the Middle East and

South-east Asia while the other had 14 years mainly in South-east Asia. The period of their

involvement in hundi ranged from 9 to 11 years. However, this does not mean that they

were primary hundiwalas for the whole period. At first, they were involved in hundi as

secondary hundiwalas in the destination country. Over time, they have been linked to

migrants overseas and the migrants’ families back home in several ways. Some migrant

families know them both as facilitators of migration and as hundiwala. Others who did not

seek help in the process of migration but asked assistance in the remittance process know

them more as hundiwalas. One of the most important characteristics of these relationships

is reciprocal obligations which include the exchange of personal favours.

Hundiwalas maintain reciprocal relations with migrant families and vice-versa.

Hundiwalas hand over the cash only to the family members that migrants suggest each

time (e.g. parents, wives, siblings, etc.). This level of loyalty to migrant workers guarantees

continuity and strengthens bonds between both parties. During their visits to family

members, hundiwalas also convey first-hand information about the experiences and the

physical condition of the migrants, which bears enormous meanings to loved ones at

home. Hundiwalas sometimes offer advance payment to needy left-behind families. This


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‘generosity’ further binds both parties in reciprocal obligations. Every Bangladesh-bound

journey for a hundiwala consists of gifts and news about non-migrating members that

migrants overseas are waiting for and vice-versa. To migrant families and their members

abroad, hundiwalas are a link between home and abroad. Each hundi transaction enhances

reliability and credibility of particular hundiwala and ensures a respectable position in the

village social hierarchy.

However, breach of hundi trust produces shame and damages reputation for

hundiwalas and their respective baris. Therefore, if any breach of hundi trust happens,

heads of different social groups like bari, gusti and samaj sit together to resolve the

unpleasant incident. Migrant families resort to community leaders for resolution but they

normally do not have any evidence to prove their claims. Therefore, they see the legal

system as almost incapable of producing positive results for them. In the community

setting, the decision of the traditional leaders must be respected and followed by both

parties. Commonly delivered decisions are: paying back the cash to the migrant families in

a limited period and sometimes with interest, the failure of which means confiscation of

the erring hundiwala’s seasonal crops, landed property, and so on. However, where hundi

trust is established in the destination country, social sanctions are different and the origin

villages have little role to play.

Case Studies in Four Destination Countries

Japan

We find both hundiwala and hundi dealers in Japan. Hundiwalas, especially primary

hundiwalas, are involved in the process of the collection of cash and are responsible for

delivery of cash to the migrant families in Bangladesh. However, they are not usually

carriers of cash, which makes them an exception compared to findings in the other three

countries under investigation (South Korea, Malaysia and Singapore). Primary hundiwalas

in Japan are usually among the earlier wave of migrants who have acquired residence

permits or other types of legal status over time. We found dozens of South Asian ethnic

stores in Tokyo and in other big cities of Japan, many owned by early Bangladeshi

migrants. These ethnic stores usually sell South Asian products, especially halal food,

catering to South Asian customers in general and the Muslim population in particular.

They serve as the primary contact points for collection of cash from migrant workers.

Hundiwalas use personal relations that have developed over time to contact the ethnic

shop owners and make agreements with regard to the collection of cash. They often

charge a fixed commission for their service ranging between 3 and 10 per cent.

Prospective remitters pay the cash to the ethnic stores and leave a note of their

details including the recipient’s name and address in Bangladesh. Hundiwalas later collect

the cash and the relevant details from the shop-owners. As hundiwalas maintain contacts

across the country and due to the impracticality of travel from one part of Japan to

another, they usually request shop-owners to deposit the cash into their bank accounts

and fax over recipients’ personal details. Primary hundiwalas contact the secondary

hundiwalas who are usually new migrants (who possess valid documents) or luggage

businessmen to send the cash to Bangladesh. These secondary hundiwalas travel weekly

on the ‘Bangladesh Biman’ which flies directly from Tokyo to Dhaka. On their outbound

trips, they usually carry gadgets and other industrial products to sell in Bangladesh; on


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their inbound trips, they carry various Bangladeshi goods to be sold in the ethnic stores.

However, as the airfare is expensive, regular visits do not produce substantial profits for

both parties. In addition, the visa for Japan is usually offered for single entry only, further

erecting barriers to frequent transnational boundary crossings.

Primary hundiwalas, therefore, transfer the bulk of the cash to two main groups:

regional hundi dealers and businessmen (importers from Bangladesh). The hundi dealers’

profit usually stems from two important sources: currency exchange rates manipulation

and the use of cash in business dealings including transfers of funds to a third destination

country (usually a developed country) and loans to Bangladeshi importers for the purpose

of ‘under-invoicing’ (Figure 2). Funds transfer is a profitable business for hundi dealers.

Their clientele include business, political and military elites who wish to circumvent

financial regulations in Bangladesh to transfer funds to a third country for personal

savings. Financial regulatory mechanisms hence generate a demand for the external funds,

creating a niche that hundi dealers can fill. In this situation, money very often moves in

both directions: into the country and out on behalf of another economic agent who wants

the foreign exchange (for details see Brown, 1994).

Japan is one of the most important importing partners for Bangladesh. Amidst the

large volume of business transactions between Japan and Bangladesh, migrant workers’

money plays an important role, especially in facilitating ‘under-invoicing’ in the import

trade. In an under-invoicing business deal, Bangladeshi businessmen make a deal with

foreign companies to under-value imported goods in official papers. Once the deals are

struck, they borrow the cash from hundiwalas or hundi dealers to pay the partner

companies behind closed doors. In some cases, we find the practice of ‘confirmation-

2. Businessman collects cash from hundi dealer or hundiwalas and pays the promised cash to the company unofficially.

3. Businessman pays back the cash to the Last Mile agent and sometimes this payment takes place confirmation-before-payment arrangement

1. Businessman contacts company from importing country and makes deal regarding under-invoicing

FIGURE 2

Under-invoicing in business. Use of money at intermediary stage. Source: Adapted from

McCusker (2005).


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before-payment’ where the recipients in Bangladesh receive the money from the

hundiwalas first before the remitters in Japan make the payments. Businessmen who

have already earned the trust of the hundiwalas do not need to pay the cash in advance.

The motivation for under-invoicing stems from the profit that the businessmen can make

by evading import duties in Bangladesh (Figure 2).

South Korea

The hundi system also exists as a dominant channel of remittances from South

Korea. We identified both hundiwalas and hundi dealers in South Korea. In contrast to

Japan, primary hundiwalas in South Korea are tourist visa holders who fly frequently to

South Korea on hundi business. Many of them worked in South Korea as trainees before

switching to the hundi business. Secondary hundiwalas are usually migrant workers*documented or undocumented*who have taken on remittance business as part-time

work alongside their regular jobs. Secondary hundiwalas are found in different industrial

sites or cities, where large congregations of Bangladeshi migrant workers can be found.

They are also found at worksites where there might be fewer than 100 migrants to cater

to. These are places where the bulk of unauthorized Bangladeshi migrant workers live in

scattered camp-like situation. These workers often avoid public places and spend much of

their time at the workplace. To meet the needs of these workers for remittance services,

enterprising migrants sometimes take on remittance business as a part-time activity. Upon

the collection of cash, they transfer the cash to primary hundiwalas with commissions

ranging from 3 to 10 per cent. The rates of commission vary depending on the presence of

pre-existing peer, regional or kinship ties.

In South Korea, the use of cash at the intermediary stage resembles that of Japan.

Primary hundiwalas basically use the cash in two areas: loans to Bangladeshi businessmen

for under-invoicing and the transfer of cash to regional hundi dealers. In both cases, they

make substantial profits. In addition, some primary hundiwalas carry cash with them

during their outbound trip to Bangladesh. From South Korea, hundiwalas do not convert

remittance money into kind because goods are expensive and do not generate substantial

extra value. However, at the time of their inbound trip to Korea, they carry Bangladeshi

goods to sell in the South Asian ethnic stores. As visa procedures are more liberal in South

Korea and there is also provision for on-arrival visas for Bangladeshis, primary hundiwalas,

who have never stayed beyond their visa allowance, can easily obtain a three-month long

stay permit in South Korea. This has further encouraged the widespread use and

development of the hundi system in South Korea.

Malaysia

The collection and use of migrant remittances in Japan and South Korea differ in

many respects from those of Malaysia and Singapore. While hundi dealers play a pivotal

role in the first two countries, we find that primary hundiwalas play the dominant role in

Malaysia and Singapore because mainly of geographical proximity to Bangladesh and

liberal visa policies in both countries. Primary hundiwalas in Malaysia are usually early

migrants who are eligible for multiple entry visas and therefore can fly back and forth

frequently. Secondary hundiwalas are either documented or undocumented migrant

workers. The remittance business features as part-time work to augment their incomes.


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The geographical origins of Bangladeshi migrant workers in Malaysia are very diverse.

There might be as many as twenty districts in Bangladesh from where a large number of

migrants hail. This diversity has produced enormous numbers of hundiwalas, especially

secondary hundiwalas because it is principally the secondary hundiwalas whom migrant

workers trust primarily. The collection of remittances in Malaysia is similar to that in South

Korea, reflecting the large number and widespread distribution of undocumented migrant

workers in both countries.

Upon the collection of cash, secondary hundiwalas transfer the cash to the

designated bank accounts of primary hundiwalas and send them mobile phone text

messages (via Short Message Service) informing them of the details of these transfers.

Based on predetermined rates, they deduct their commissions from the collected cash at

the time of the transfer. Primary hundiwalas fly with cash and goods to Bangladesh on

weekdays and return to Malaysia with Bangladeshi goods to sell in ethnic stores on

weekends. The second route to channel remittances is the same as that found in South

Korea and Japan: transfers of cash to businessmen for under-invoicing and regional hundi

dealers. However, the under-invoicing phenomenon is much less common in Malaysia

where there is a general lack of coordination between hundiwalas and businessmen

(importers). While the bulk of the cash is carried by hundiwalas themselves on their regular

weekly trip, only a small portion of the cash is transferred to the regional hundi dealers for

profits.

Recently, however, a significant number of Bangladeshi students have been

emerging as new users of cash. Every year, thousands of self-financing Bangladeshi

students enroll in educational institutions in Malaysia and borrow cash from hundiwalas to

meet their educational expenses. Hundiwalas also collect cash from their parents in

Bangladesh at predetermined interest rates. The demand for such funds transfer exists

because formal transfers of fund from Bangladesh to other countries involve lengthy

bureaucratic procedures which many parents find not only inconvenient but also ‘costly’

because of the foreign currency conversion rates and, at times, off-putting due to the

unprofessional conduct of officers.

Some migrants have married local Malay-Muslim women and integrated into the

mainstream of Malaysian society. These are the individuals who have opened up shops

and businesses to serve the South Asian migrants. Some hundiwalas receive financial and

immigration support from these immigrant communities in the form of sponsorship for

long-time Malaysian visas.

Singapore

In many ways, Singapore is a classic example of the hundi system in East and South-

east Asia. Until recently, the hundiwala was almost the sole operator of remittance

transfers for Bangladeshi migrant workers in Singapore. Primary hundiwalas in Singapore

are usually tourist visa holders who fly back and forth weekly. We find the role of

secondary hundiwalas limited and, in some cases, trivial. Unlike secondary hundiwalas in

South Korea, Japan and Malaysia, secondary hundiwalas in Singapore are more like

collaborators who assist the primary hundiwalas in the collection but do not charge any

commission for their services. Hundiwalas use kinship, friendship and regional/village

networks to find these collaborators. The phenomenon of Sunday gatherings is very

popular among migrant workers in Singapore. There might be around 25,000 to 35,000


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Bangladeshis who regularly congregate at Little India on Sunday afternoons for a myriad

of purposes including the business of remitting money home.

Migrant workers who intend to remit money home visit particular lanes, roadsides or

shop premises in Little India on Sundays and meet their particular hundiwalas to whom

they hand in the cash directly. This Sunday phenomenon, as well as Singapore’s small

geographical size, has contributed to the dominance of primary hundiwalas in the direct

collection of cash, in contradistinction to the other three countries. Primary hundiwalas

visit Singapore usually on Fridays and collect the cash on Sundays. They do some

shopping on Mondays and leave Singapore by Tuesday. It is important to note that

electronics, cosmetics and gold ornaments from Singapore (not necessarily made in

Singapore) bear high social and economic value in Bangladesh in general and many

migrant-source districts in particular because the possession of such goods provides a

context to claim higher social status in some source areas (Rahman 2004). The operation of

the system is simple: collect cash from migrants; spend the cash to purchase different

types of goods; return to home country with goods; sell them in the local markets for tidy

profits and pay back the money to the migrant families. On the return journey, they carry

goods to sell in Bangladeshi shops in Singapore. Over time, several dozens of Bangladeshi

shops have come into being in Singapore to serve Bangladeshi migrant workers.

In the case of Singapore, hundiwalas usually collect money from migrants of their

geographic origin so that they can deliver the cash within the weekly circle. Some

hundiwalas also transfer cash to hundi dealers in Singapore with commission. In addition,

Singapore as a regional education and health-care hub has been able to attract a

substantial number of Bangladeshi students and medical tourists annually. We also

observed some use of migrant savings in education and medical tourism.

Singapore as a global city is well-connected in the region and the rest of the

world. The hundi business capitalises on its financial connectedness in the global

economy. Singapore as a regional centre for business and financial activities follows a

liberal policy for transfers of funds internationally, and this has accorded to Singapore

the reputation of being a regional ‘hundi hub’. Singapore plays the central role in hundi

dealing in East Asia, South-east Asia, Oceania and South Asia, paralleling the role of

Dubai in hawala dealing in Middle East, Europe and South Asia. Some changes, however,

have taken place in recent years. One of these is the imposition of visa restrictions on

Bangladeshis after 9/11. Formal remittance players are presently taking advantage of

these restrictions to establish a presence, as reflected in the sharp rise in total inflow of

remittances from Singapore in the last three years in terms of the recorded remittances

data (see Table 2).

Although the hundi has emerged as a trusted system in East and South-east Asia, it is

not free from the risk of betrayal. Migrants are generally aware that they have little

recourse to the law in the case of fraud to recoup their money as they lack legal

documents. While in the minority, we found that in all four countries studied, there were a

few cases wherein hundiwalas did not pay back the cash to the recipients at all or cases

wherein there were delays in delivering the cash to the families back home. As hundi trust

at the destination end is often built on the relationships developed and expanded in the

course of migration, the concerned migrant workers therefore get in touch with their

primary contact points to recoup the cash. In general, other migrant workers in tandem

with concerned migrants and hundiwalas usually organize meetings for an amicable

solution and the decision that arises from such community meetings is usually maintained


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by the concerned hundiwalas. Otherwise, the hundiwalas who are responsible for betrayal

will lose trust among the migrant community leading eventually to the termination of

hundi enterprise. If hundi trust is built on the social and symbolic ties in the communities

of origin, community leaders back home play the dominant role in the repayment of

cash.

Features of Hundi: Home and Host Countries

We have shown three phases in hundi transactions, involving the first mile (host

country), the intermediary stage and the last mile (home country). We have identified

some differences in the collection of cash in the four countries studied. While hundiwalas

in Japan use ethnic shops as a collection point, hundiwalas in the other three countries

physically approach the prospective remitters to collect the cash. Primary hundiwalas are

usually liable to the migrant workers and their families for the ultimate payment of cash.

However, this is not the case in all four countries. In South Korea and Malaysia, the liability

lies primarily with the secondary hundiwalas, who are in fact fellow migrant workers. This is

because migrant workers are from diverse sources (districts of origin in Bangladesh); they

are mainly irregular in status and enter the country in large numbers; and they

are geographically scattered in different parts of the host country. As a result, many

primary hundiwalas find it difficult to manage without sharing the liability with some

intermediary group. This sharing of liability with secondary hundiwalas has made the hundi

popular and accessible to all sections where migrant workers are, whether they are

working legally or illegally, in cities or remote places, and in construction, the plantations

or manufacturing.

We have described how migrant workers’ money is used and re-used at the

intermediary stage to make profit. The involvement of different interest groups*for

instance, businessmen and regional hundi dealers*at the intermediary stage in fact has

not hampered the transfer process; rather, it has made the process smoother and more

profitable for the hundiwalas. The uses and re-uses of funds at the intermediary stage

depend on the geo-political location of the host countries. We have found some

similarities in the use and re-use of funds between Japan and South Korea in East Asia and

between Malaysia and Singapore in South-east Asia. In East Asia, a sizeable amount of

remittances is used for the purpose of import under-invoicing. However, in South-east

Asia, hundiwalas play a much more important role in the transfer process. They spend

remittances on goods for sale in home market while use of remittances for import under-

invoicing is minimal. The South-east Asia scene has also given rise to the emergence

of new users such as students and medical tourists as reported in the cases of Malaysia

and Singapore. The role of hundi dealers, however, remains equally important in both

regions.

We have explained the bases of cooperation and mobilization of resources in a

situation of migration and remittances in a migration source village, Gurail, Bangladesh.

We have shown how hundi developed in a remote village. Migrant families and hundiwalas

are found embedded in a social-relational context characterized by social and symbolic

ties. Hundiwalas are found to have benefited through money or social debts incurred in

the process of remittance transfers. We have shown that in the hundi system, one requires

social capital and embeddedness in social relations. The hundi is thus founded on social

infrastructure comprising social and symbolic ties, which is reinforced through reciprocity


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over time. The system is composed of a web of interconnecting social relationships that

supports the transfer of migrants’ savings internationally. We have focused on reliability

and credibility as essential ingredients to a hundi business, and these are maintained

through social sanctions. Failure to maintain the principles of hundi leads to permanent

damage of reputation at home and abroad and may even lead to eventual cessation of

business.

We have shown that the hundi possesses several characteristics. Two of the

economic incentives that hundiwalas offer to migrant workers are exchange rates which

are higher than those offered by formal institutions and zero-fee services. Hundiwalas also

offer speedier service, door-to-door service, that is, hundiwalas collect the cash from the

migrants by visiting their residences or gathering places in host countries and then deliver

the cash to the migrants’ families in the home countries. It is a two-way service*hundiwalas carry not only cash, gifts and firsthand information from migrants overseas

to their families in source communities, they also carry gifts, goods and firsthand

information from the migrants’ families to the migrants in host countries. The hundi

system is culturally compatible for both migrants and their families. In general, most of

these migrant workers and their left-behind families have limited education and are

usually unfamiliar with formal banking procedures and terminology, in addition to

conservative family traditions in Bangladesh (especially certain bari traditions), which often

encourage maintaining minimal contact with the ‘outside world’ for their women folk. A

trusted and acquainted hundiwala who is linked by strong ties is an acceptable

intermediary in such circumstances.

Conclusion

This paper has attempted to advance understanding of the social organization of

informal remittances using the example of the hundi system found among Bangladeshi

migrants in East and South-east Asia. The paper reports that, despite the presence of

formal remittance systems, the majority of migrants choose to send remittances through

informal mechanisms, particularly the hundi system. We have suggested that hundi

fundamentally relies on mutual trustworthiness and involves mutual obligations,

assurances, and understanding. The strength and contents of social ties between migrant

workers and hundiwalas are crucially important as the social basis of the hundi system.

These ties are found in the traditional form of social relationships that bind hundiwalas and

migrants and their families into a social and business web at home and abroad. Both the

migrant and the hundiwala capitalize on social and symbolic ties in the course of

migration: a migrant draws on these ties to transfer funds safely and cheaply while a

hundiwala uses them to make material (economic) and non-material (social status) gains.

From a hundiwala’s perspective, involvement in the hundi is not only economically

rewarding but also socially significant because it offers a venue to reposition oneself in the

rural social hierarchy.

We have reported that the relationship between the hundi system and

unauthorized migration is complex with few easy answers. We cannot conclude that

the hundi is merely a vehicle for funds transfer among unauthorized migrants. Although

Singapore hosts a minimal number of unauthorized foreign workers, the use of the

hundi is widespread. A survey of 126 Bangladeshi migrant workers in Singapore

conducted in 2003 revealed that 95 per cent of migrant workers remitted money


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through the hundi system while the remaining five per cent remitted using formal

channels (Rahman 2004). Despite the presence of a large number of unauthorized

migrant workers in all the other three countries, we have found that a substantial

amount of money was remitted through formal channels, especially in Japan and

Malaysia (Table 2). If we compare Japan with South Korea, the complexity will further

unfold. Japan lacks a legal framework to accommodate Bangladeshi migrants while

South Korea hires them under legal arrangements. If we consider unauthorized status as

the sole indicator for widespread use of the hundi, there should be higher proportions of

formal remittance flows from South Korea compared to Japan, but this is not the case.

These discrepancies can only be explained by a deeper understanding of the social

infrastructure on which the hundi system is based and the value of the services that it

provides to migrant workers and their families.

The increasing securitization of remittances after the 9/11 terrorist attack has

substantially affected the operation of hundi in the region. While there may be loopholes

in the informal funds transfer system, the primary question that needs to be asked is who

will gain and who will lose from the increasing ‘securitization of remittances’. Given the

recent rise in the use of official channels, it is clear that formal institutions including banks

and MTOs have benefited from the increasing formalization of remittances. From the

migrant workers’ perspective, it is obvious that they are the losers from this increasing

securitization process because they are not getting the best deal in funds transfers.

Migrant workers often sacrifice their family’s assets to be able to migrate and such risks

often lead to long-term indebtedness as they are often not able to redeem their debts

quickly. As migration is at the level of individual financial arrangements, migrant workers

deserve the right to select the most economical and convenient channel of funds transfers.

As the formal system does not provide a cheap and convenient service for these debt-

ridden low-skilled migrant workers, their right to choose a better deal for every hard-

earned dollar should be facilitated.

ACKNOWLEDGEMENTS

The authors wish to thank Habibul Haque Khondker, Lian Kwen Fee, Jennifer Jarman,

Shapan Adnan, Roger Ballard (CASAS, University of Manchester), C.R. Abrar (RMMRU,

Bangladesh), Khurshed Alam (BISR, Bangladesh), and Binod Khadria (JNU, India) for their

support. The authors also thank the anonymous reviewers of Asian Population Studies for

their insightful comments on the draft version of this article. Financial support from the

Asia Research Institute, National University of Singapore is noted with appreciation.

NOTES

1. The term ‘migrant remittances’ generally refers to ‘transfers in cash or kind from migrants

to resident households in the country of origin’ (Bilsborrow et al. 1997, p. 321).

2. See Hernandez-Coss 2005; Puri & Ritzema 1999; APEC 2003; El Qorchi et al. 2003; Mellyn

2003; Seddon 2004; Monsutti 2005; Sharma 2006; Ballard 2004b. For details about

relevant literature, please refer to our working paper (Rahman & Yeoh 2006).

3. However, this does not mean that individuals from cities do not migrate to this region as

unskilled workers. A small number of them do and also probably use hundi to transfer


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their funds. Since the majority is of rural origin, we therefore look into the rural social

infrastructure to explore the hundi operation.

4. For details about Bangladeshi labour migration to East and South-east Asia, please refer

to an earlier draft of this paper, Rahman and Yeoh (2006), available online at: http://

www.populationasia.org/Publications/RP/AMCRP20.pdf

5. This cumulative figure comes from the BMET, the official body responsible for keeping

records of authorized migrant workers. However, it does not keep records for returning

migrants. Available online at: http://www.bmet.org.bd/Reports/Flow_Migration.htm

(accessed 7 May 2007).

6. See http://www.bmet.org.bd/Reports/Flow_Migration.htm (accessed 7 May 2007).

7. Information on different banks involved in remittance in Bangladesh and overseas is

compiled from the Bangladesh Bank website: www.bangladesh-bank.org (accessed 9

November 2005).

8. Information regarding Western Union and MoneyGram was compiled from their

websites; see http://www.westernunion.com and http://www.moneygram.com (accessed

18 November 2005).

9. Esthanio is a Bengali word which indicates belongingness to a particular geographic area

which may be a village, union, or local administrative units like thana or districts,

depending on the context. It involves certain responsibilities: execution of these

responsibilities brings prestige for the person concerned while denial draws the

condemnation of society.

10. Attiyo bears enormous significance in the Bangladeshi society. The word ‘Attiyo’ means

‘connected by heart’. When a Bangladeshi mentions that he is my Attiyo, it means ‘he is

part of my heart’. However, it depends on the context*villagers sometimes use it loosely

and sometimes strongly. Attiyo covers blood relatives and relatives by marriage (for

details see Bertocci 1972; Rozario 1992; Wood 1994).

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hundi: an informal remittance transfer system in asia

Documents

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