Disruptive Transformation: Digitising Financial Practices in Pakistan

Noman Baig

Habib University

Introduction

In South Asian literary imagination, bazaars are spaces of rational and irrational behaviours. Sufi and bhakti poets primarily depict marketplaces as places of indifference. Fakirs (ascetics) and dervishes (Sufis) exhibit autonomy while strolling and wandering in commercial areas known to maximise self-interest. However, within the last few decades, with the opening of markets to globalised forces of capitalism, consumerism, and technology, bazaar practices and imagination gradually shifted towards rationalisation. For example, the rhizomatic bazaar spatial outlook is replaced with modern grid-like shopping arcades and malls. Mystics, vagabonds, and the poor who are fed outside of local restaurants are no longer given food in front of high-end foreign cafes. Cash is becoming redundant, slowly vanishing into digital wallets. This article explores how bazaar financial practices shift to a standardised money-management system by drawing on ethnographic observation of Karachi’s markets, in particular, the labourers’ use of emerging branchless banking systems to transfer value from urban to rural areas. The article explores how wage labourers transfer money and how digital technologies are changing Pakistan’s financial landscape. Although standardisation of financial practices goes back to colonial times in British India, the need to rationalise money circulation in present-day Pakistan stems from the discourse of national security.

This article begins by exploring a bazaar’s character to show that, historically, bazaar spaces operate at the nexus of secularism and religion and how modernisation seeks to separate esoteric religious practices from commercial activities. The second section illuminates a sense of place in Karachi’s marketplace through the bazaar spaces and financial practices, which resemble the rhizomatic structure and makes the analysis of monetary networks challenging. The third section shows the rise of branchless banking in Pakistan and how digital transactions are slowly replacing the cash-based economy of the bazaar. The article concludes that a new kind of fiscal subjectivity is taking shape due to financial technologies.  

The Shape of Bazaar

I situate my research within the matrix of economic, political, and religious forces that shapes South Asian marketplaces (Bayly 1988). In pre-modern South Asia, religious and economic worlds were interpenetrated in ways that resisted categorising human experience into the sacred and profane. The rulers themselves rarely differentiated secular powers from divine sovereignty, a style of statecraft that can aptly be described as ‘saintly’ and ‘messianic’ epitomised in sacred kingship (Moin 2014). From this epistemological view, pre-modern marketplaces of South Asia were a conglomeration of earthly desires and spiritual aspirations that gave rise to transactions at several levels. The merchants were connected with international channels of commodity and capital flows through a diasporic kinship network (Ho 2006; Maloni 2003; Markovits 2000; Nadri 2008). They were also patrons of Sufi shrines and religious practices, offering a proportion of this wealth, a monetary gift called dana, as part of the long-term cycle of cosmic purification (Parry et al. 1989). These commodity and gift-exchange practices coexisted in marketplaces.

With the intervention of modernity, the shape of human experience was drastically reconfigured, subsuming the vertical dimension of time into a homogenous horizontal temporal frame. The shape of time was altered when the British undertook an extensive formalisation of the Indian subcontinent’s marketplaces and vernacular financial system. For instance, in 1835, the East India Company introduced uniform rupee coinage for its territory (Goldsmith et al. 1983). In his work on North Indian marketplaces, Sudipta Sen argues that bazaars were the epicentre of colonial knowledge production, and the colonising state saw the claims of multiple political regimes and religious orders on marketplaces variously as medieval, tyrannical, and oriental (1998). Political documents, commercial reports, and revenue figures were used as the tools of political intervention to transcend the incommensurability of marketplace cultures. Talal Asad describes the process as the ability to convert the problem of incommensurability of culture into ‘one of commensurable social arrangements without rendering them homogenous’ (2002: 84). Moreover, colonial authorities regulated vernacular capitalism by coding it as a rarefied cultural formation and simultaneously developed a judicial regime to discipline merchants into enterprising selves and citizens of the modern state (Birla 2009). The merchant’s life-world, joint families, religious and esoteric practices, speculation, and betting were all seen as backward and irrational and were thus impediments to capitalist development (Birla 2009).

Although the colonial government was instrumental in introducing uniform market practices, it was a ‘historic failure of capital to realise its universalising tendency under colonial conditions’ (Guha 1997: xii). Despite the disciplining efforts of the colonial government, South Asian marketplaces continued to reflect a medley of religious-economic practices. In his work on Calcutta’s marketplaces, Hugh Urban (2001) shows the many ingenious ways spiritual and ascetic practices have appropriated and transformed economic, mercantile, and even European capitalist discourse, turning it to the advantage of a largely poor class esoteric religious movement. Similarly, historian Nile Green’s research on Bombay marketplaces shows how industrialisation created various social conditions for its different participants, shaping a diverse and often contradictory set of religious demands. While an English-educated comprador class demanded Muslims of scripture and sobriety, the workers in their warehouses sought a religion of carnival holidays and miracles. The increasing social complexity of a cosmopolitan and class-differentiated capitalist city thus found expression in ‘increasing religious production and diversification rather than standardisation in the religious economy of an industrialising environment’ (Green 2011). Thus, people’s relationship with a transcendental reality took a new form under modernity but did not wholly withdraw the ‘eternal’ from the human experience.

The Market  

The Indian Partition altered centuries-old merchant networks and bazaar spaces as well. For instance, the majority of the Karachi-based Hindu merchant class, Amil, left for India. As a result, the bazaars’ contemporary social composition is solely made up of Muslims. The fledgling Pakistani state turned Karachi into its principal trading port of commodities and finance out of a desire to link the country with international trade. The country’s largest wholesale bazaar, Bolton Market, emerged as the financial and commercial centre of the city, with more than 3,000 shops of cosmetics, currency dealers, textiles, and jewellery (Cheema 2007). The Muslim merchant class controls these businesses; most are ethnic Gujaratis and belong to the Ismailis, Khoja, Bohra, Memon, and Kathiawari ethno-religious groups. Other merchant groups are ethnic Punjabi, Sindhi, and Urdu-speakers. At the same time, the bazaar’s daily wage earners are ethnic Pakhtun and Baloch. These diverse forms of Islam, ethnicity, and kinship weave the richly complicated social tapestry of Bolton Market.

A spatial reading of Bolton Market demonstrates British imperial practices inscribed in the built environment. The colonial sovereign image is visible in Karachi’s larger urban landscape, which is divided into native and colonial quarters; the former’s growth was organic, with narrow capillaries of alleys suitable only for pedestrians and animal carts, while the latter was developed rapidly and laid out on a grid iron-street pattern and low in density (Hasan et al. 2008). Moreover, the traditional sections of the city were relegated as ‘backward’ or inferior parts, while the new cantonments and Staff and Civil Lines areas became the ‘progressive’ sections, synonymous with the modern city (Lari et al. 1997). The native quarters house religious beliefs, a dwelling place for numerous shrines and mosques, which still provide a serene and peaceful space for merchants and labourers alike amidst the hustle and bustle of Karachi’s most dense marketplace. These sacred places also foster esoteric Islamic practices and rituals that feed into commercial bazaar activities in various ways. Thus, this market is a multi-layered space with shared identities, boundaries, and affiliations (Bestor 2004; Geertz et al. 1979). While ‘white’ quarters were laid out to promote regimented and supervisory spatial practices, recreation spaces were separate from residential areas. These historical spatial orderings map onto the contemporary everyday life in Karachi.

Financial practices in Karachi’s marketplaces are latticework, convoluted, and rhizomatic. In just a single transaction, many actors can be involved, such as banks, moneychangers, security agencies, and merchants. Sometimes transactions may consist of shrines, mosques, and charity organisations under the mere fact that the gift economy and commodity exchange are so tightly knit. Hence, it becomes challenging to neatly categorise and differentiate one method of financial transfer from another. It is also incorrect to use labels such as ‘informal market’, which, according to recent estimates, is 75%–90% larger than the size of the ‘formal’ economy. To be very clear, ‘informal’ does not mean that the market operates haphazardly, randomly, or irrationally. However, it is the kind of impression we generally get when we hear the word ‘informal’. If it can be neatly categorised as informal, it does not operate outside of the formal market. Both domains intermix with each other at multiple locations.

Nevertheless, with the beginning of a profoundly destructive War on Terror by the USA, the merchants’ financial practices have come under direct state scrutiny due to their alleged role in financing terrorism. The post-911 monetary regulation thus involves new licensing and auditing regimes, centralised accountability structures, and computerised monitoring of capital flows. Specifically, merchants engaged in currency-related businesses, i.e. foreign exchange, remittance, and money transfer undergo mandatory registering and licensing processes with state agencies. They must also report their daily transactions to the State Bank of Pakistan. These new measures are challenging how merchants handle money through customary networks of kinship and trust. The last decade however witnessed a new revolution in money transfer methods, which is changing the old patterns and habits of transferring value from one place to another.

Branchless Banking

A critical aspect of corporate finance is the role of information and communication technologies (ICTs) in advancing the discourse of financial inclusion for unbanked people driven by the thrust of ‘branchless banking’ (Fisher et al. 2006; Merritt 2011). In Pakistan, five foreign mobile phone companies, in partnership with eight licensed financial service providers, have brought the entire country under a comprehensive network coverage for paying bills, sending/receiving money within Pakistan or from abroad, or giving donations. In addition, new sets of financial rearrangements have been introduced into the markets, transforming retailers into branchless bankers, and increasing the prospect of financial inclusion of the hitherto unbanked population. According to the State Bank of Pakistan, the average number of branchless banking transactions per day is increasing over time and the average size of a transaction is Rs. 3,700 (USD 22.53). ¹ Similarly, the quarterly growth of the number of agents engaged in branchless banking is rapidly transforming the retailers of commodities into retailers of money (Maurer 2015).

One of the most popular services for transferring money is Easypaisa, established in 2009 as a collaboration between the Norway-based mobile company Telenor and a Pakistan-based microfinance bank called Tameer Bank. Easypaisa has become a household name in Pakistan in just a short period, catering to small businesses and migrant labourers. It has also expanded its reach to foreign remittances, credit loans, and bill payments, and increasingly shaping how people handle money in Pakistan. Easypaisa accounts for almost half of the market share of branchless banking. The phenomenal growth of Easypaisa became the important catalyst for the country’s major financial service providers to start branchless banking, reconfiguring the financial networks historically dependent on the conventional means of kinship and trust (Shabib-ul-Hasan et al. 2012). Despite the rapid rise of branchless banking people are generally recalcitrant in the cash-driven marketplaces of the postcolonial world and show distrust towards emerging financial technologies. In my preliminary research, part of which is shared here, labourers mentioned that for every Rs. 1,000 (US$ 5.98), Easypaisa charges Rs. 60 (US$ 0.35), compared to a local intermediary who charges Rs. 30 (US$ 0.17). More importantly, money is delivered at home with kinship networks, whereas with Easypaisa, an individual has to go to the retail agent to receive the money. In conservative tribal areas where women cannot move freely, getting a home delivery through a kinship network is still preferable for money transfers.

A migrant labourer who supported branchless banking said, ‘Easypaisa is a good thing. Now we can send money instantly. Our family members back in the village do not need to borrow money from anyone, even from our relatives. Before Easypaisa, women in the village were vulnerable and suffered the risk of losing their honour when they had to borrow money from their relatives or neighbours. Now we send it to them instantly’. It is important to observe that such instant money transfers or movements also affect temporal sensibilities. Why wait for a day or two when the money can be sent or received within seconds? More importantly, this change has added a new dimension in community relations whereby family members can be more dependent on Easypaisa, the autonomous and objective entity that is free from personalised attributes, than on embedded familial ties.

The cut-throat competition among service providers has forced the branchless banks to deliver cash to homes and has made it relatively more accessible for anyone to open an agent franchise. According to a Telenor staff member, whom I call Kashif, the method of getting a franchise is simple. ‘The first thing we looked at is if there is a physical space, especially the roof, and that it has legal property documentation. We do not give franchise status to shacks, or at least in the book. However, sometimes exceptions can be made’, said Kashif.

According to a Telenor representative, the success of Easypaisa was primarily because of Telenor’s standing as a mobile company. The conversation reveals that financial institutions and telecommunication corporations coalesce to create a new digital architecture in place of old patterns. The mobile operators themselves are now becoming money managers. This shift alters the conventional forms of money transfer networks that depend on personalised ethnicity and kinship channels.

Transferring Money

There are more than 70,000 Easypaisa retail agents in Pakistan, and in Karachi alone, there are more than 500 agents. The number of retail agents continues to increase rapidly, given the fact that it takes just two days for a retailer to get a franchise. One of the retail agents in Karachi’s middle-class neighbourhood of Gulberg, whom we will call Tariq, has acquired services from all five major money transfer companies. However, he expressed disconcertment with regards to the commission charged for each transaction: ‘Easypaisa used to offer Rs. 9 (US$ 0.05) for every Rs. 1,000 (US$ 5.9). However, now they offer Rs. 7 (US$ 0.04). For every Rs. 15,000 (US$ 89), we make Rs. 58 (US$ 0.34)’. The commission decreases as new companies enter the scene. The volume of transactions carried out is usually Rs. 100,000 (US$ 598), but in some migrant-dominated areas, the volume goes up to Rs. 200,000 (US$ 1,198) per day.

Because of increasing competition among the branchless banking companies, retail agents are getting lower commissions when compared to, for instance, Easypaisa, which charges Rs. 60 (US$ 0.34) for every Rs. 1,000 (US$ 5.98). Despite decreasing commissions, retail agents such as Tariq continue to operate their businesses, offering branchless banking services to lower-income neighbourhoods in Pakistan. Retail agents enjoy repertoire in communities. ‘I am from this neighbourhood, so people know me quite well. They trust me, too. I am doing this business as a mohalla dari (someone with neighbourhood ties). Most of the time, customers just come and hand over the cash for a domestic transfer, and they do not even ask for a receipt’, Tariq said confidently. Since business involves money, it becomes imperative for the business owner to possess social and cultural capital. Tariq uses his social capital of being from the neighbourhood, familial ties, and goodwill in the market to successfully run his business among migrant labourers. His embedded links give, as he said, a ‘more localised and personalised’ structure to the capital that usually operates in the formal bank settings. This is the main reason that the labourers use retail agents for domestic transfer rather than local banks.

Since its inception in 2009, Easypaisa has become a phenomenal success among migrant labourers and small businesses. Many labourers expressed satisfaction with opening branchless banking services in their localities, giving them quick access to financial services hitherto unavailable to the masses. Historically, labourers rely on informal money transfer systems such as hundi/hawala or send physical cash with a truck driver or a relative. However, with the spread of Easypaisa and other such services, labourers find it convenient to transfer money instantly without relying on informal networks. This emergent form of money transfer slowly has changed the way people perceive money and impacts the existing social patterns of domesticity and gender norms.

One of the Pakhtun workers I came across was Khan Zarin, who is from the tribal area of Bajaur near the Pakistan-Afghanistan border. He has been working as a porter in Karachi’s various wholesale markets for more than 35 years. Now in his early fifties, Khan Zarin finds it extremely difficult to lift heavy boxes up and down in the warehouses or push the pull-cart to the truck station in Karachi. However, he has no other option than to lift heavy boxes in the market, for which he earns Rs. 12,000 (US$ 71)/month. His two sons, ages 22 and 14, are also employed, bringing additional financial support to the household of 12 people. Upon asking how he sends money to his family in the village, Khan Zarin took me to another porter, Laal Zeb, from Bajaur. Zeb’s brother owns a grocery shop in Bajaur. Khan Zarin handed over Rs. 2,500 to Laal Zeb and told him to deliver an equivalent amount of food rations to his home in the village. Zeb called his brother and asked him to deliver the rations to Zarin’s house. The entire transaction took place orally without sending any physical cash to the village. Most of these transactions are based on value transfer mechanisms, involving no cash transfer, physically or electronically. If the labourer wants to transfer cash, he will use Karachi-based moneylenders who charge Rs. 30 (US$ 0.17) for every Rs. 1,000 (US$ 5.98) (30% interest). In local parlance, it is called badla (exchange).

One of the reasons that branchless banking is becoming popular in countries like Pakistan is the nature of existing financial services. For instance, many migrant labourers expressed dissatisfaction with commercial banks. The banks do not cater to the poor masses. Waqas and Sami who work as janitorial staff in a corporate bank in Karachi have expressed that they are unfamiliar with how the money transfer system works in the banks. ‘We do not use banks because we do not have any knowledge of the banking system; we do not know the method of how to send money’, said Sami, who shared the following personal experience: ‘One time the message sent to the receiver was deleted, so I got worried and afraid and had “doubts”; “What if the money is lost?”’. This kind of incident shows the precariousness of the emerging branchless banking and how it depends heavily on mobile networks, which in Pakistan get shut down occasionally by the government in its effort to disrupt terrorist operations. Sometimes technical glitches can cause an interruption in transactions, in which case, according to a Telenor representative, it takes 15 days to process the transaction record. In most instances of lost trades, the retail agent has to bear the burden. To avoid such issues, Telenor has protected each transaction with multiple layers of coding. The first is the national identity card number, the second a telephone number, the third a unique number assigned at the end of the phone number, and the fourth is a passcode.

Today’s South Asian metropolises are the hubs of financial activities, changing people’s behaviour in large numbers in few minutes or even seconds. This process is called ‘disruptive transformation’, a forceful intervention in people’s life to transform them and make them vulnerable to global contingencies of the risky and corrupt nature of the financial world. According to Qasif Shahid, the CEO of the fintech company, Finja, ‘When hundreds of millions of people reinvent their relationship with money, which means they pay differently, save differently, invest differently, protect differently, then that is when the disruptive transformation has happened’. In 2017, the Indian state decided to disrupt the entire nation by demonetising the cash-based economy, which comprises more volume than the formal counterpart, to force people into a cashless economy. For some, digitisation of finance may signal a new future: instant, easy, and fast. Still, for the majority who continue to survive on US$ 1/day, demonetisation was a grand heist as it robbed the poor of their savings. Such financial interventions in the name of financial inclusion have turned entire lives on the whim of the financial market, which is seen as ‘speculative tournaments’ (Appadurai 1988) or an ‘economy of appearances’ (Tsing 2000), and existing in abstract forms of fictitious capital.

With the rise of digital finance, for example, online payment services such as Easypaisa and mobile wallets, the online retail sector is also rapidly transforming. A new breed of consumers is beginning to grow in an economy mainly dependent on the popular and reliable ‘cash on delivery (CoD)’ service. The ease of ordering goods online and doing home-based businesses is now altering domestic spaces and sentiments. For example, many homemakers living in secluded homes now sell cosmetics, clothes, and food on social networks. Some of the women feel financially empowered while staying at home and observing strict family codes. The new logistic companies are mushrooming and competing for the speedy delivery of goods across the country. It increases the pressure on already debilitating urban infrastructure. The delivery personnel riding motorbikes crisscrossing the city’s traffic congests narrow lanes and streets. New rhythms and velocities intersect and displace sedimented lifestyles. It flushes a slow-paced personalised economy and replaces it with fast-moving supplies of goods and services.

Concluding Observations

The development of the financial sector, especially after the liberalisation of world markets in the 1990s, is primarily carried out on neoliberal economic principles. This involves the privatisation of banks, free flow of capital, micro-credit, and the digitisation of money. In the last decade, a new discourse of financial inclusion has emerged calling for the inclusion of the unbanked masses, as if poor people do not have any financial management skills and are thus completely ignorant to how money is managed in everyday life. According to the World Bank Global Findex, only 13% of people maintain a bank account in Pakistan compared to 45% in South Asia. Pakistan ranks lowest in financial inclusion. Branchless banking signals radical democratisation of formal finance by providing easy access to people for loans, credits, and savings. More than 300,000 branchless banking agents indeed point to the increased penetration of financial services deep inside rural and poor urban communities. This penetration indicates the rapid financialisation of the economy at the grassroots level.

The majority remains outside formal banking. To exist outside the financial order means exceeding the limits of surveillance. Hence, from the states’ perspective, money circulating outside the rationalised financial architecture threatens the global monetary order. The Paris-based intergovernmental regulatory body, Financial Action Task Force (FATF), deploys discourse of security to bring the unregulated money into the gambit of economic logic and state surveillance. Under pressure, the Pakistani state introduces mandatory auditing practices for the financial institutions to root out suspicious transactions. In the post-9/11 security era, the state has also criminalised hawala and informal money transfer systems for their alleged use by terrorists to fund terrorism against the West.

The standardisation of financial markets arises from the discourse of security. Hence, a dynamic, violent force perpetuated by the state machinery drives a recent surge in rationalising bazaar life-worlds. The power deployed to demonetise and delegitimise older commercial habits coerces people to new money and regulatory frameworks. In a postcolonial context, coercion is often brutal and violent. The demonetisation of currency bills in India is a prime example of the state’s sheer force to change people’s behaviour. The arrest of currency dealers allegedly financing terror or demonising Muslim charities is another example of using sovereign authority to perpetuate corporate neoliberalism. Therefore, power must remain a central concern in the analysis of markets. However, the transformation of bazaar culture into rational-secular order does not go unchallenged. Often new ways get incorporated into sedimented structures. For example, a branchless banking retail agent often draws clientele from his personalised-communal networks. As the saying goes, old habits die hard. In rare instances, organised resistance seeks to halt the state-led agenda of financial development.      

While the state curbs informal ways, a slow process of introducing new technological instruments for futures trading, currency speculation, online payment systems, branchless banking, and mobile wallets alters fiscal behaviour and subjectivity. The speed, anxiety, and ease emerge as a new set of dispositions in place of slow, patient, and personalised attributes of the self. The wait of a few days for a transaction to actualise is no longer tolerated but has become history. More particularly, people’s perception of money radically alters from a tactile material into an ephemeral substance on screens. The haptic presence of cash bills slowly vanishes as digitised currency grips people’s imagination. In today’s techno-scientific age, we are witnessing a significant transformation in the medium of exchange, that is, money, upon which modern economic architecture stands. Hence, a narrative on the changing character of bazaar economies remains superficial if we do not study money’s mutation from a personalised ‘memory bank’ (Hart 2007) to digital numbers.

In the last 20 years, the retail market has risen exponentially, and even more so with the COVID-19 pandemic. Famous international retailers, Carrefour and SPAR, catering to the affluent class, are slowly reaching out to middle-classes for a bigger market share. The availability of easy credit lines further increases the purchasing power of the middle class. Despite phenomenal growth in the financial and retail sectors, the labour class remains precarious. The labourers struggle to survive on minimum wages, barely meeting their daily needs. In such conditions, charity networks offer support, either giving them the monthly ration or feeding the poor at the food banks. Hence, the state must develop a comprehensive pro-poor framework of social protection and curb the unbridled growth of capitalism.

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Notes

¹ The Pakistani rupee has shown a decreasing trend vis-à-vis major European and American currencies. In 2011, the exchange rate was US$ 1 = 88 Rupees. On September 6, 2021, the exchange rate is US$ 1 = 167 Rupees.

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References

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