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Hundi/Hawala: The Problem of Definition1

Published online by Cambridge University Press:  01 July 2009

MARINA MARTIN
MARINA MARTIN*
Affiliation:
Economic History Department, London School of Economics, Houghton Street, London WC2A 2AE, UK Email: [email protected]
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Abstract

In contemporary times, Hundi has collected countless labels; the international press has spurned innumerable villainous descriptions, the bulk of which have helped to perpetuate a dense fog of notoriety. The critical problem lies in definition. As there is an incomplete understanding of hundi's form and remit, there is also a rather limited understanding of why the system persists, set against the backdrop of modern banking. In many ways the problem of definition presented legal and financial authorities of the early and late twentieth century with core issues which remain unresolved and problematic for authorities in the twenty-first century. By drawing on archival and other historical material pertaining to the system's usage amongst Indian merchants, this paper attempts to tackle much of the confusion and many misconceptions surrounding hundi. The discussion explores the idea that hundi is more accurately described as an indigenous banking system endowed with a complex range of functions, but whose central purpose is trade.

Type
Research Article
Information
Modern Asian Studies , Volume 43 , Issue 4 , July 2009 , pp. 909 - 937
Copyright
Copyright © Cambridge University Press 2008

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References

References

National Archives of India

Nehru Memorial Museum and Library

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Correspondence from Lieutenant-Colonel H. Daly, Agent to the Governor General in Central India and Opium Agent in Malwa, to the Secretary to the Government of India, Finance Department, 9th January 1908. Foreign, Internal, Progs., No. 234, January 1908, 1, Part B.Google Scholar
Correspondence from the Chief Secretary to the Government of Bombay, to the Honourable Agent to the Governor General in Central India, 18th December 1907. Foreign, Internal, Progs., No. 121, April 1908, 4, Part B.Google Scholar
Express letter from the Chief Secretary to Government of the North West Frontier Province, to the Foreign Office in Simla, 15th July 1940. External Affairs, Frontier, Progs., Nos. 521-F, 1940.Google Scholar
Letter no. L.30/45 G.S. from Adams, P.F, Esqr., Secretary to the Governor of Assam, to the Joint Secretary to the Government of India, Finance Department (Central Revenues), Shillong, 27th March, 1945. External Affairs, Central Asian, Progs. Nos. 491-X, 1937.Google Scholar
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“Burma Provincial Banking Enquiry Committee, Vol. 1: Banking and Credit in Burma.” Rangoon, 1930.Google Scholar
“Indian Central Banking Enquiry Committee, Vol. 1, Pt. 2: Minority Report.” Nehru Memorial Museum and Library, 1931.Google Scholar
“Report of the Bombay Provincial Banking Enquiry Committee 1929–30, Vol. I.” Bombay, 1929–30.Google Scholar
“Report of the Study Group on Indigenous Bankers.” Bombay: Banking Commission, Government of India, 1971.Google Scholar
Prosecution and Defence Expert Witness reports, Prosecution counsel case summaries, and Operation Sparkle general summary for Regina v. Shahid Siddiq, Abid Iqbal, Christopher Hall, 2006.Google Scholar
Ballard, Roger. “A Background Report on the Operation of Informal Value Transfer Systems (Hawala).” 2003.Google Scholar
Ballard, Roger. “Coalitions of Reciprocity and the Maintenance of Financial Integrity Within Informal Value Transmission Systems: The Operational Dynamics of Contemporary Hawala Networks.” Journal of Banking Regulation 6 (4) (2005): 319–352.CrossRefGoogle Scholar
Ballard, Roger. “Hawala Transformed: Remittance-Driven Transnational Networks in the Post-Imperial Economic Order.” Centre for Applied South Asian Studies, University of Manchester, 2004.Google Scholar
Ballard, Roger. “Methods of Account Settlement Utilised by Transnationally Oriented Pakistani Businesses: An Expert Report.” 2006.Google Scholar
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Ballard, Roger. “Processes of Consolidation and Settlement in Remittance Driven Hawala Transactions Between the UK and South Asia.” Centre for Financial Studies and Innovation Roundtable on Hawala, London, March 2003.Google Scholar
El Qorchi, Mohammed, Maimbo, Samuel M., and Wilson, John F.. Informal Funds Transfer Systems: An Analysis of the Informal Hawala System. Washington, D.C.: IMF/World Bank, 2003.CrossRefGoogle Scholar
Jost, Patrick M., and Sandhu, Harjit Singh. “The Hawala Alternative Remittance System and Its Role in Money Laundering.” Lyon: Interpol General Secretariat, 2000.Google Scholar
Listfield, Robert, and Montes-Negret, Fernando. “Modernising Payment Systems in Emerging Economies.” In The World Bank Policy Research Working Paper 1336. Washington, D.C., 1994.Google Scholar
Maimbo, Samuel Munzele. “The Money Exchange Dealers of Kabul: A Study of the Hawala System in Afghanistan.” The World Bank, 2003.CrossRefGoogle Scholar
Passas, Nikos. 2003. “Hawala and Other Informal Value Transfer Systems: How to Regulate Them?” From US Department of State International Information Programs, http://usinfo.state.gov/eap/Archive_Index/Hawala_and_Other_Informal_Value_Transfer_Systems_How_to_Regulate_Them.html (accessed February 2006).CrossRefGoogle Scholar
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Passas, Nikos. “Informal Value Transfer Systems, Terrorism and Money Laundering.” National Institute of Justice, 2003.CrossRefGoogle Scholar
Sending Money Home? A Survey of Remittance Products and Services in the United Kingdom, Department for International Development, 2005.Google Scholar
UK Remittance Market, Department for International Development, 2005.Google Scholar
Bester, Hennie. “AML/CFT in Developing Countries.” In The Third International Hawala Conference, Abu Dhabi, 2005.Google Scholar
Passas, Nikos. “Fighting Terror With Error? Transcending Fact-Free Policy Making.” In The Third International Hawala Conference, Abu Dhabi, 2005.Google Scholar
The Third International Conference on Hawala, Abu Dhabi, 2–3 April 2005, http://www.cbuae.gov.ae/Hawala/presentationsList.htm.Google Scholar
Cheema, Shah. “Fiducitation: Hawala – Traditional Asian Remittance System.” 2001. From www.fiducite.com, http://www.fiducite.com/Fiducitations/Fiducitation%20-%20Hawala%20Traditional%20Asian%20Banking%20System.htm (accessed March 2005).Google Scholar
Coggan, Philip. “The Chronology of Corruption.” The Financial Times, 1991 (accessed: LexisNexis, April 2004).Google Scholar
Field, Michael. “An Island of Mixed Communities.” Financial Times, 1983 (retrieved from LexisNexis, May 2004).Google Scholar
Haubold, Erhard. “Spekulationen ueber die Rolle der indischen Mafia” (Speculation Over the Role of the of Indian Mafia). Frankfurter Allgemeine Zeitung GmbH, 1993.Google Scholar
“India Cash Market Tied to Burgeoning Scandal: Funds from Abroad Key Hawala Deals.” Chicago Tribune (sourced from the Associated Press), 1996 (accessed: LexisNexis, June 2004).Google Scholar
Lakhani, Dilip. Amount Borrowed or Repaid on Hundi – Section 69D. From Laws4India.com, Lex Infotax (India) Pvt. Ltd., http://www.laws4india.com/corporatelaws/commentary/cc/cc5.asp (accessed 18 November 2005).Google Scholar
Mayank, Chhaya. “Diaries Tell a Sordid Story of Corruption.” India Abroad, 1996 (accessed: LexisNexis, June 2004).Google Scholar
M. Rama Rao for All-India Radio in English, 1545 gmt 22 June 1993. “Finance Minister Interviewed on Inflation, IMF, Subsidies.” BBC Summary of World Broadcasts, 26 June 1993 (from LexisNexis, 2004).Google Scholar
Nadkarni, Shirish. “Confidence in Tatters Over Hawala Fallout.” South China Morning Post, 1996 (accessed: LexisNexis, June 2004).Google Scholar
Proceeds of Crime Act. 2002. From Office of Public Sector Information, http://www.opsi.gov.uk/acts/acts2002/20020029.htm (accessed February 2006).Google Scholar
Swami, Praveen. “Kashmir's Hawala Scandal.” Frontline, 23 August–5 September 1997.Google Scholar
Austin, Gareth, and Sugihara, Kaoru. “Local Suppliers of Credit in the Third World, 1750–1960: Introduction” in Local Suppliers of Credit in the Third World, 1750–1960, edited by Gareth Austin and Kaorus Sugihara. London: Macmillan Press Ltd., 1993.CrossRefGoogle Scholar
Banarasidas. Ardhakathanak (1641). Translated by Lath, Mukund. Jaipur, India: Rajasthan Prakrit Bharati Sansthan, 1981.Google Scholar
Bayly, C. A.Rulers Townsmen and Bazaars: North Indian Society in the Age of British Expansion, 1770–1870. New Delhi, India: Oxford University Press, 1983.Google Scholar
Dhume, S. M.The Evolution of Banking in India, Part II. Bombay, India: Examiner Press & Publishers, 1926.Google Scholar
Grasshof, Richard. Das Wechselrecht der Araber: Eine rechtsvergleichende Studie ueber die Herkunft des Wechsels. Berlin: Otto Liebmann, 1899.Google Scholar
Greif, Avner. “Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders.” The Journal of Economic History 49 (4) (1989): 857–882.CrossRefGoogle Scholar
Habib, Irfan M. “Banking in Mughal India.” In Contributions to Indian Economic History I, edited by Raychaudhuri, Tapan. Calcutta, India: Firma K. L. Mukhopadhyay, 1960.Google Scholar
Jain, L. C.Indigenous Banking in India. London: Macmillan, 1929.Google Scholar
Markovits, Claude. The Global World of Indian Merchants, 1750–1947: Traders of Sind from Bukhara to Panama. Cambridge, UK: Cambridge University Press, 2000.CrossRefGoogle Scholar
McGregor. Oxford Hindi-English Dictionary. Oxford: Oxford University Press, 1993.Google Scholar
Monier-Williams, Monier. A Sanskrit-English Dictionary (etymologically and philologically arranged). Oxford: Oxford University Press, 1899.Google Scholar
Ray, Rajat Kanta. “Indigenous Banking and Commission Agency in India's Colonial Economy.” In Money & Credit in Indian History, edited by Bagchi, Amiya Kumar. New Delhi, India: Tulika Books, 2002.Google Scholar
Rudner, David. “Banker's Trust and the Culture of Banking Among the Nattukottai Chettiars of Colonial South India.” Modern Asian Studies 23 (3) (1989): 417–458.CrossRefGoogle Scholar
Rudner, David. Caste and Capitalism in Colonial India: The Nattukottai Chettiars. Berkeley: University of California Press, 1994.CrossRefGoogle Scholar
Accountant Generals’ Office correspondence to Earl Cornwallis K.G., Governor General in Council in the Public Department of Fort William, 11th June 1789. O.C., No. 4, 12 June 1789.Google Scholar
Correspondence from Lieutenant-Colonel H. Daly, Agent to the Governor General in Central India and Opium Agent in Malwa, to the Secretary to the Government of India, Finance Department, 9th January 1908. Foreign, Internal, Progs., No. 234, January 1908, 1, Part B.Google Scholar
Correspondence from the Chief Secretary to the Government of Bombay, to the Honourable Agent to the Governor General in Central India, 18th December 1907. Foreign, Internal, Progs., No. 121, April 1908, 4, Part B.Google Scholar
Express letter from the Chief Secretary to Government of the North West Frontier Province, to the Foreign Office in Simla, 15th July 1940. External Affairs, Frontier, Progs., Nos. 521-F, 1940.Google Scholar
Letter no. L.30/45 G.S. from Adams, P.F, Esqr., Secretary to the Governor of Assam, to the Joint Secretary to the Government of India, Finance Department (Central Revenues), Shillong, 27th March, 1945. External Affairs, Central Asian, Progs. Nos. 491-X, 1937.Google Scholar
Rose, W.A., Under Secretary to the Government of India, to the Secretary to the Governor of Assam, Shillong, 24th April 1945, C. No. 114-Cus. II/45. Sadiya Frontier Tract – Hundies and bills of exchange brought by Tibetan and Chinese Traders coming via Lohit Valley route – Prohibition against – Relaxation of. External Affairs, Central Asian, Progs. Nos. 491-X, 1937.Google Scholar
“Burma Provincial Banking Enquiry Committee, Vol. 1: Banking and Credit in Burma.” Rangoon, 1930.Google Scholar
“Indian Central Banking Enquiry Committee, Vol. 1, Pt. 2: Minority Report.” Nehru Memorial Museum and Library, 1931.Google Scholar
“Report of the Bombay Provincial Banking Enquiry Committee 1929–30, Vol. I.” Bombay, 1929–30.Google Scholar
“Report of the Study Group on Indigenous Bankers.” Bombay: Banking Commission, Government of India, 1971.Google Scholar
Prosecution and Defence Expert Witness reports, Prosecution counsel case summaries, and Operation Sparkle general summary for Regina v. Shahid Siddiq, Abid Iqbal, Christopher Hall, 2006.Google Scholar
Ballard, Roger. “A Background Report on the Operation of Informal Value Transfer Systems (Hawala).” 2003.Google Scholar
Ballard, Roger. “Coalitions of Reciprocity and the Maintenance of Financial Integrity Within Informal Value Transmission Systems: The Operational Dynamics of Contemporary Hawala Networks.” Journal of Banking Regulation 6 (4) (2005): 319–352.CrossRefGoogle Scholar
Ballard, Roger. “Hawala Transformed: Remittance-Driven Transnational Networks in the Post-Imperial Economic Order.” Centre for Applied South Asian Studies, University of Manchester, 2004.Google Scholar
Ballard, Roger. “Methods of Account Settlement Utilised by Transnationally Oriented Pakistani Businesses: An Expert Report.” 2006.Google Scholar
Ballard, Roger.“The Principles and Practice of Hawala Banking.” 2002. From (accessed April 2003).Google Scholar
Ballard, Roger. “Processes of Consolidation and Settlement in Remittance Driven Hawala Transactions Between the UK and South Asia.” Centre for Financial Studies and Innovation Roundtable on Hawala, London, March 2003.Google Scholar
El Qorchi, Mohammed, Maimbo, Samuel M., and Wilson, John F.. Informal Funds Transfer Systems: An Analysis of the Informal Hawala System. Washington, D.C.: IMF/World Bank, 2003.CrossRefGoogle Scholar
Jost, Patrick M., and Sandhu, Harjit Singh. “The Hawala Alternative Remittance System and Its Role in Money Laundering.” Lyon: Interpol General Secretariat, 2000.Google Scholar
Listfield, Robert, and Montes-Negret, Fernando. “Modernising Payment Systems in Emerging Economies.” In The World Bank Policy Research Working Paper 1336. Washington, D.C., 1994.Google Scholar
Maimbo, Samuel Munzele. “The Money Exchange Dealers of Kabul: A Study of the Hawala System in Afghanistan.” The World Bank, 2003.CrossRefGoogle Scholar
Passas, Nikos. 2003. “Hawala and Other Informal Value Transfer Systems: How to Regulate Them?” From US Department of State International Information Programs, http://usinfo.state.gov/eap/Archive_Index/Hawala_and_Other_Informal_Value_Transfer_Systems_How_to_Regulate_Them.html (accessed February 2006).CrossRefGoogle Scholar
Passas, Nikos. Informal Value Transfer Systems and Criminal Organisations: A Study into So-Called Underground Banking Networks. Netherlands: Ministry of Justice, 1999.Google Scholar
Passas, Nikos. “Informal Value Transfer Systems, Terrorism and Money Laundering.” National Institute of Justice, 2003.CrossRefGoogle Scholar
Sending Money Home? A Survey of Remittance Products and Services in the United Kingdom, Department for International Development, 2005.Google Scholar
UK Remittance Market, Department for International Development, 2005.Google Scholar
Bester, Hennie. “AML/CFT in Developing Countries.” In The Third International Hawala Conference, Abu Dhabi, 2005.Google Scholar
Passas, Nikos. “Fighting Terror With Error? Transcending Fact-Free Policy Making.” In The Third International Hawala Conference, Abu Dhabi, 2005.Google Scholar
The Third International Conference on Hawala, Abu Dhabi, 2–3 April 2005, http://www.cbuae.gov.ae/Hawala/presentationsList.htm.Google Scholar
Cheema, Shah. “Fiducitation: Hawala – Traditional Asian Remittance System.” 2001. From www.fiducite.com, http://www.fiducite.com/Fiducitations/Fiducitation%20-%20Hawala%20Traditional%20Asian%20Banking%20System.htm (accessed March 2005).Google Scholar
Coggan, Philip. “The Chronology of Corruption.” The Financial Times, 1991 (accessed: LexisNexis, April 2004).Google Scholar
Field, Michael. “An Island of Mixed Communities.” Financial Times, 1983 (retrieved from LexisNexis, May 2004).Google Scholar
Haubold, Erhard. “Spekulationen ueber die Rolle der indischen Mafia” (Speculation Over the Role of the of Indian Mafia). Frankfurter Allgemeine Zeitung GmbH, 1993.Google Scholar
“India Cash Market Tied to Burgeoning Scandal: Funds from Abroad Key Hawala Deals.” Chicago Tribune (sourced from the Associated Press), 1996 (accessed: LexisNexis, June 2004).Google Scholar
Lakhani, Dilip. Amount Borrowed or Repaid on Hundi – Section 69D. From Laws4India.com, Lex Infotax (India) Pvt. Ltd., http://www.laws4india.com/corporatelaws/commentary/cc/cc5.asp (accessed 18 November 2005).Google Scholar
Mayank, Chhaya. “Diaries Tell a Sordid Story of Corruption.” India Abroad, 1996 (accessed: LexisNexis, June 2004).Google Scholar
M. Rama Rao for All-India Radio in English, 1545 gmt 22 June 1993. “Finance Minister Interviewed on Inflation, IMF, Subsidies.” BBC Summary of World Broadcasts, 26 June 1993 (from LexisNexis, 2004).Google Scholar
Nadkarni, Shirish. “Confidence in Tatters Over Hawala Fallout.” South China Morning Post, 1996 (accessed: LexisNexis, June 2004).Google Scholar
Proceeds of Crime Act. 2002. From Office of Public Sector Information, http://www.opsi.gov.uk/acts/acts2002/20020029.htm (accessed February 2006).Google Scholar
Swami, Praveen. “Kashmir's Hawala Scandal.” Frontline, 23 August–5 September 1997.Google Scholar
Austin, Gareth, and Sugihara, Kaoru. “Local Suppliers of Credit in the Third World, 1750–1960: Introduction” in Local Suppliers of Credit in the Third World, 1750–1960, edited by Gareth Austin and Kaorus Sugihara. London: Macmillan Press Ltd., 1993.CrossRefGoogle Scholar
Banarasidas. Ardhakathanak (1641). Translated by Lath, Mukund. Jaipur, India: Rajasthan Prakrit Bharati Sansthan, 1981.Google Scholar
Bayly, C. A.Rulers Townsmen and Bazaars: North Indian Society in the Age of British Expansion, 1770–1870. New Delhi, India: Oxford University Press, 1983.Google Scholar
Dhume, S. M.The Evolution of Banking in India, Part II. Bombay, India: Examiner Press & Publishers, 1926.Google Scholar
Grasshof, Richard. Das Wechselrecht der Araber: Eine rechtsvergleichende Studie ueber die Herkunft des Wechsels. Berlin: Otto Liebmann, 1899.Google Scholar
Greif, Avner. “Reputation and Coalitions in Medieval Trade: Evidence on the Maghribi Traders.” The Journal of Economic History 49 (4) (1989): 857–882.CrossRefGoogle Scholar
Habib, Irfan M. “Banking in Mughal India.” In Contributions to Indian Economic History I, edited by Raychaudhuri, Tapan. Calcutta, India: Firma K. L. Mukhopadhyay, 1960.Google Scholar
Jain, L. C.Indigenous Banking in India. London: Macmillan, 1929.Google Scholar
Markovits, Claude. The Global World of Indian Merchants, 1750–1947: Traders of Sind from Bukhara to Panama. Cambridge, UK: Cambridge University Press, 2000.CrossRefGoogle Scholar
McGregor. Oxford Hindi-English Dictionary. Oxford: Oxford University Press, 1993.Google Scholar
Monier-Williams, Monier. A Sanskrit-English Dictionary (etymologically and philologically arranged). Oxford: Oxford University Press, 1899.Google Scholar
Ray, Rajat Kanta. “Indigenous Banking and Commission Agency in India's Colonial Economy.” In Money & Credit in Indian History, edited by Bagchi, Amiya Kumar. New Delhi, India: Tulika Books, 2002.Google Scholar
Rudner, David. “Banker's Trust and the Culture of Banking Among the Nattukottai Chettiars of Colonial South India.” Modern Asian Studies 23 (3) (1989): 417–458.CrossRefGoogle Scholar
Rudner, David. Caste and Capitalism in Colonial India: The Nattukottai Chettiars. Berkeley: University of California Press, 1994.CrossRefGoogle Scholar