To Sue or Not to Sue: How Afghan Merchants Strategically Choose to Use or Avoid Courts

Rahimi, Haroun

doi:10.1017/asjcl.2019.35

Cited by 3 publications

(2 citation statements)

References 15 publications

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“…Formal property rights cannot be used to secure credit transactions because formal deeds are scarce, the titling system is a failure and formal property right system does not reflect the practical needs of the property rights owners in Afghanistan (Foley, 2011;Wiley, 2003Wiley, , 2004. Formal contract enforcement institutions cannot reliably enforce credit transactions because the underdevelopment of formal property rights and the instability of Afghanistan's business climate have made it difficult to hold the debtors accountable (Rahimi, 2019).…”

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Hawalaas credit: recognizing howhawalasupports the business climate in Afghanistan

Rahimi

2020

JMLC

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Purpose The purpose of this study is to explore the role of hawala in supporting Afghanistan’s business climate. It illustrates the use of hawala as credit and its importance for the local merchant community. Design/methodology/approach The empirical data presented in this article draws from more than 83 semi-structured interviews with Afghan merchants, business leaders, hawaladars and judicial officials, conducted between March and August 2017 in five major provinces of Afghanistan, namely, Kabul, Herat, Balkh, Nangarhar and Kandahar. These five provinces collectively represent half of Afghanistan’s economy, one-third of Afghanistan’s total population and more than four-fifth of Afghanistan’s urban population. The commercial courts that sit in these five provinces hear more than 90% of total commercial disputes in the country. Findings In Afghanistan, despite their reputation for being the bankers of terrorists and criminals, hawaladars primarily serve Afghan merchants – the overwhelming majority of their customers – helping them cope with an uncertain business climate. Within supply chains, Afghan importers rely on credit-hawala to protect themselves from the interruptions of cash flow that are prevalent throughout the Afghan economy. Practical implications Drawing on extensive field research, this article highlights how hawala stabilizes financing and markets in Afghanistan, arguing that while hawala regulations are necessary to counter abuse of hawala, regulators must be cognizant of how hawala is used in financing of legitimate businesses, or they will exacerbate the problems of access to credit. Originality/value While the historical studies of hawala reveal its inextricable link with trade financing, the current hawala literature completely neglects hawala systems’ contemporary financing role. Instead, the literature is completely dominated by the globalization trend of terrorism, money laundering and worker migration. Neglecting the trade financing role of hawala causes policymakers not to appreciate the impacts of hawala regulations on the trade fully. Overlooking hawalas’ role in financing transnational trade also results in the exclusion of an important group of stakeholders – namely, merchant-users of hawala services who are the main beneficiaries of hawaladars’ financing services – from the process of regulation of hawala systems. The main reason that hawala regulations have failed to gain tractions in countries such as Afghanistan is that these regulations have not been cognizant of the multifaceted functions of hawala markets and do not include all stakeholders in the regulation process.

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Hawalaas credit: recognizing howhawalasupports the business climate in Afghanistan

Rahimi

2020

JMLC

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“…While these practices may make transactions easier, they do expose entrepreneurs to opportunism. For instance, oral contracting, without written records, can make it impossible to obtain legal remedy against partners who violate agreements (e.g., Rahimi, 2019). While oral contracting or paying sight-unseen makes transactions possible in contexts where businesses may not have official addresses or bank accounts, they also expose entrepreneurs to opportunism.…”

Section: Trust and Business Performance In The Bopmentioning

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Trusting without a Safety Net: The Peril of Trust in Base of the Pyramid Economies

Pryor

Zahra

Bruton

2022

J Management Studies

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In high-transaction-cost environments, such as the world's poorest base-of-thepyramid economies (BOP), trust helps entrepreneurs form partnerships while conserving resources related to monitoring, contracting, and other transaction costs. However, trust can also expose entrepreneurs to their partners' opportunism. In developed economies, effective and consistent legal systems can protect against such opportunism. But what happens when formal institutions are ineffective and inconsistent, as is common in BOP economies, and how does trust influence entrepreneurs' performance subsequent to forming partnerships? We answer these questions, drawing on a sample of 338 entrepreneurs in the Kingdom of Eswatini (formerly known as Swaziland). We find that entrepreneurs' trust has a negative effect on business operating performance, indicating that, given the legal systems in the BOP context, trusting entrepreneurs bear more fully the brunt of opportunism. However, this negative effect can be mitigated when entrepreneurs register their businesses with the government and pay taxes. We also find that, for entrepreneurs who earn income from other businesses, the negative effect of trust on performance is stronger. We found no moderating effect related to entrepreneurs' education.

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Order in the Bazaar: The Transformation of Non-state Law in Afghanistan’s Premier Money Exchange Market

Choudhury¹

2021

Law Soc. Inq.

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Based on fourteen months of ethnographic research on the central money exchange bazaar in Kabul, Afghanistan—Sarai Shahzada—this article examines the micro-dynamics of legal change within a close-knit community in a fragile setting. For most of its history, the bazaar has been governed by informal legal norms. New state-building measures after 2001 led to increased efforts by the state to regulate the bazaar, causing money exchangers to initiate internal transformations to protect their autonomy. While scholarship generally argues that state coercion substitutes for private legal norms, this study shows the centrality of the state in consolidating the bazaar legal system. Exchangers have cast their non-state legal system in the image of the state by formalizing new operating rules that have introduced a management structure and dispute resolution forum. New state licenses have also helped to safeguard the boundaries of the bazaar. This article contributes to private governance and legal pluralism scholarship by revealing that a private community, even in a fragile state, may be capable of maintaining an autonomous non-state legal system not in spite of, but rather by depending on, the state.

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To Sue or Not to Sue: How Afghan Merchants Strategically Choose to Use or Avoid Courts

Cited by 3 publications

References 15 publications

Hawalaas credit: recognizing howhawalasupports the business climate in Afghanistan

Hawalaas credit: recognizing howhawalasupports the business climate in Afghanistan

Trusting without a Safety Net: The Peril of Trust in Base of the Pyramid Economies

Order in the Bazaar: The Transformation of Non-state Law in Afghanistan’s Premier Money Exchange Market

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