Remittances and Reputations of Hawala Money Transfer Systems: Self-Enforcing Exchange on an International Scale

Migrant worker remittances often take place outside the scope of government enforcement. Through an examination of the informal remittance transfer system of hawala, this paper argues that self-enforcing exchange mechanisms can support high volume trade in the absence of formal contract enforcement. Hawala networks employ ex post reputation mechanisms between agents and ex ante signaling to uphold obligations under conditions of contract uncertainty.