Evolution of trust in hawala networks – business relationships analysis from inception to maturity

Abstract

Purpose

Trust within hawala networks (HN) (a type of deeply embedded informal value transfer network) has been associated with minimal bureaucracy, relationship versatility and low operational costs. In the absence of formal governance structures, HN business relationships largely depend on trust as a control mechanism that brings operational efficiency and transactional effectiveness. However, a basic and a static view of HN business trust has been reported. This paper aims to track the progress and development of trust within HN. More specifically, this paper charts HN relationship trust transformation from inception to maturity. Social exchange theory (SET) and Dwyer et al. (1987) topology of formal business relationship development were used as conceptual frameworks to study development of trust within HN.

Design/methodology/approach

Twenty-five in-depth interviews were conducted with HN members in the South Asia region. Chain referral sampling was used to contact and recruit suitable respondents within the semiscattered HN. The data were collected from practicing and retired HN members from Qatar, Saudi Arabia and Pakistan. The data were analyzed using keyword categorization and further substantiated, and validated, by NVivo analysis.

Findings

Four types of trust (i.e. calculative, verifiable, reciprocal and earned) were identified in HN relationships. It was revealed that trust progressed in a stepwise fashion from calculative trust (basic trust form) to earned trust (ultimate trust form). SET explained the progression of trust in terms of key drivers of different trust types at various stages of HN exchanges and relationships. In addition, it was observed that HN trust development followed Dwyer et al. (1987) topology of business relationship development.

Originality/value

This study extended the oversimplistic treatment of trust within HN by looking into its different types and its transformation over time. More specifically, this research provided an insight into how various types of trust were used within deeply embedded informal business networks to maintain and nurture business exchanges.

Citation

Sharif, K., Faisal, M.N., Kassim, N. and Zain, M. (2023), "Evolution of trust in hawala networks – business relationships analysis from inception to maturity", International Journal of Islamic and Middle Eastern Finance and Management, Vol. 16 No. 1, pp. 34-58. https://doi.org/10.1108/IMEFM-05-2021-0181