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

September 2021
Law & Social Inquiry 47(1):1-39

DOI:10.1017/lsi.2021.41

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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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Order in the Bazaar: The Transformation of

Non-state Law in Afghanistan’s Premier

Money Exchange Market

Nafay Choudhury

Based on fourteen months of ethnographic research on the central money exchange

bazaar in Kabul, Afghanistan—Sarai Shahzada—this article examines the micro-dynam-

ics 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 intro-

duced 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 gover-

nance 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.

INTRODUCTION

Why do some non-state legal systems persist over time? In Afghanistan, money

exchangers have played a central role in supporting the economy for over two hundred

years. Since the 1950s, exchangers have consolidated their activities in the country’s

central money bazaar—Sarai Shahzada—which is located on the Kabul River in the

heart of the city. The four-story structure as it currently stands consists of approximately

four hundred shops with a single entrance where people—mostly men1—of all walks of

Nafay Choudhury is the Jeremy Haworth Research Fellow, St Catharine’s College, University of

Cambridge, United Kingdom; Social Sciences and Humanities Research Council Postdoctoral Fellow,

Faculty of Law, University of Toronto, Canada. Email: nc585@cam.ac.uk

The author received generous feedback and support from David Nelken, Florian Grisel, Farhana Rahman,

Sapna Reheem Shaila, Nadia Lambek, JiříPřibáň, Morag Goodwin, David Kennedy, Zulﬁqar Ali Khan,

Ahmad Milad Assakzai, Mohammad Amin Amin, Abdul Musawer Ishan, Amir Khan Saleh, Naveed

Saiﬁ, Habib Faizi, Wahidullah Haidari, Angel Cabrera Silva, Michelle Wilde Anderson, Dan Farbman,

and Jeffery Omari. The Afghan Institute for Strategic Studies provided an institutional home during ﬁeld-

work; the author thanks the director general, Davood Moradian, for his continued support. This research

was made possible through funding from the Sociolegal Studies Association and the Dickson Poon School of

Law, King’s College London.

1. There is no rule prohibiting women from entering the bazaar, and in the different commercial mar-

kets across Kabul, it is common to see both men and women customers. However, during the course of my

ﬁeldwork, which involved multiple visits to the bazaar each week, I observed the presence of women in the

bazaar only on a few occasions.

Law & Social Inquiry

Volume 00, Issue 00, 1–39, 2021

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properly cited.

Law&

Social

Inquir

life engage in ﬁnancial transactions. Each person depends on the market for his or her

own reason. Some need to transfer money abroad, while others wait to receive funds.

Some see the bazaar as a place to safely store money, while a small few who possess a

surplus of wealth seek to reap a proﬁt by providing funds to exchangers as capital invest-

ment. Others simply need to exchange local Afghanis for one of the other currencies in

circulation. Throughout most of its history, the affairs of money exchangers have always

been regulated by the non-state legal norms of their close-knit community.

The reign of the Taliban government from 1996 to 2001 brought about a strong

upturn in activities in the bazaar given the total absence of banking facilities during this

period. The crowds of men that would ﬂock to the bazaar—two stories high in those

days—were so numerous that individuals would elbow one another as they hustled

across the market ﬂoor. The events of September 11, 2001, signiﬁcantly altered the tra-

jectory of Afghanistan and the bazaar. The Taliban were ousted within a few months,

and the international community—with the United States at the helm—commenced

reconstruction efforts in the country. In the years that followed, development efforts got

into full swing, and billions of dollars rolled into Afghanistan (Suhrke 2012; Bizhan

2018a, 2018b). By 2010, some seventeen banks were operating, several of which

had agreements with foreign correspondent banks to make international bank transfers.

Given the expansion of the banking sector, one may have expected that activities in the

bazaar would shrink, with demand moving from the informal to the formal sector.

The reality was quite the contrary. Activity in the money bazaar sharply increased

after 2001. Thanks to an economic upsurge fueled by foreign funds pouring into

Afghanistan, the Afghan government as well as both local and international non-gov-

ernmental organizations (NGOs) initiated countless development projects throughout

the country. Money exchangers stepped up to provide the ﬁnancial services needed to

move hundreds of millions of dollars across various provinces. Furthermore, the height-

ened demands on the overall economy increased demand for imported goods from

abroad (Marsden 2015,2016,2018), and exchangers provided the ﬁnancial architecture

that allowed for funds to move across regional and international boundaries. The

intriguing success of the bazaar is not solely economic but also legal. After 2001, money

exchangers continued to transact according to internal market norms while also intro-

ducing new practices into the bazaar. In the decade and a half following 2001, the

bazaar underwent crucial internal transformations, which helped to consolidate its prac-

tices and its overall autonomy vis-à-vis a progressively expanding state.

This article studies the transformations in the bazaar over the past two decades that

have allowed it to maintain an autonomous legal order that operates outside of the state

legal system. Two transformations are explored in detail—the formation of an internal

management structure in the bazaar and the formalization of a dispute resolution forum.

These changes can be traced to the actions of money exchangers who sought to

strengthen the authority of the bazaar, thereby maintaining its operational autonomy,

while also transforming it through contact with the state and state actors. Furthermore,

these transformations do not represent a wholesale rejection of earlier informal regula-

tory practices, which persist, albeit in a different form. The bazaar reveals how a close-

knit community of actors has cast its non-state legal system in the image of the state by

formalizing many of its affairs and has come to rely on the state to safeguard its bound-

aries. Formalization here refers to the process of regularization by instituting rules and

2 LAW & SOCIAL INQUIRY

structures, thereby providing a level of uniformity of activities. Nonetheless, while mim-

icking the state, these actors have been able to maintain long-standing informal regu-

latory practices, albeit in a new and altered form. The transformations within the bazaar

show how state and non-state legal systems have become more closely entangled

through their contact with one another, even while allowing the latter to maintain

its autonomy from the former. Put in another way, greater interdependence has entailed

greater independence—the more alike, the more apart.

This article makes three distinct contributions to the literature on law, private gov-

ernance, and legal pluralism. First, the article offers a rare glimpse into the little-known

world of Afghanistan’s money exchangers, thereby adding a novel fragile state perspec-

tive to the discussion on legal order within private communities. Afghanistan is a par-

ticularly rich site to study non-state legal ordering in fragile settings. Fragile settings face

unique governance challenges as the state legal system does not always have a monopoly

over the rule of law and may be viewed as being incapable of impartially resolving dis-

putes (Massoud 2013). In 2020, the Fragile States Index ranked Afghanistan as the

ninth most fragile nation globally (out of 179), and the country has occupied a position

near the top of this list for most of the last decade and a half since the index began.2

Decades of successive wars have crippled state functionalities, including justice institu-

tions (Swenson 2017). Scholarship on private governance has predominately focused

on communities within highly developed states with well-functioning legal systems

(Ellickson 1991; Bernstein 1992; Feldman 2006). A handful of studies shine a spotlight

on such communities in non-Western and fragile settings (McMillan and Woodruff

1999,2000; Fafchamps 2004; Greif 2006; Paquin 2012; Grossman 2021), and this study

adds much needed empirical variation within this limited subset of scholarship.

Second, and contrary to the prevailing literature, this article demonstrates how a

non-state legal system may maintain its autonomy not by avoiding the state legal system

but, rather, by depending on it. The money exchange bazaar conveys a story seldom told

—namely, the reliance on the state, fragile as it may be, to consolidate the non-state

legal system of a private community. Much of the current scholarship focuses on the

functioning of private communities in highly developed countries and explains why

and how such communities avoid state interference. Studies focusing on fragile settings

tend to attribute the persistence of non-state laws to the absence of the state (Fafchamps

1996; McMillan and Woodruff 2000; Paquin 2012); accordingly, as the state expands,

these non-state legal orders also disappear.

The money bazaar tells a different story. The legal system of the bazaar has been

able to maintain its independence even during a period of rapid state expansion by

transforming its operating structures. Exchangers have appropriated legal forms originat-

ing from the state—namely, its formalized and regularized operating structures—and

have successfully institutionalized them within the bazaar. This transformation, while

bringing the bazaar into closer alignment with the state, has also allowed for the former

to maintain its autonomy from the latter. In the course of a few years, Kabul’s money

bazaar has transformed from an informal legal system operating without any centralized

governance structure into a formalized and organized system that nonetheless continues

to operate independently of state law. Furthermore, government licenses have helped

2. Fragile States Index, Global Data (2021), https://fragilestatesindex.org/data/.

Order in the Bazaar 3

safeguard membership into the community of exchangers who work in the bazaar, fur-

ther bolstering its overall cohesion. In sum, the bazaar’s legal system operates not in

spite of, but rather by depending on, the state.

Third, this article showcases the micro-dynamics of legal transformation when sys-

tems of order interact, revealing how formalization entails both change and continuity.

The existing literature on private governance mostly describes how such communities

function, placing less focus on how those functions transform over time, thereby allow-

ing the community to maintain cohesion and normative authority under changing cir-

cumstances (Ellickson 1991; Bernstein 1992; Dixit 2004; Feldman 2006; Stringham

2015). Private communities are not frozen in time but, rather, are capable of evolving.

In the bazaar, money exchangers have responded to changes in their environment by

formalizing a written “statute”governing the affairs of exchangers and introducing a

centralized management structure, including a dispute resolution “commission.”

These changes represent a break from previous practices, as no formal, regularized

bureaucracy or set of rules existed prior; however, exchangers continue to draw exten-

sively on prior practices. Most notably, the newly introduced dispute resolution com-

mission in the bazaar relies extensively on prior informal legal norms. The continued

reliance on these long-standing norms has helped legitimize the new changes intro-

duced into bazaar’s legal system.

This study is based on fourteen months of ethnographic ﬁeldwork in Kabul, speak-

ing to money exchangers, businessmen, central and commercial bankers, government

ofﬁcials, and justice actors as well as frequenting the central money bazaar (a site also

frequented by insurgent groups). I carried out a total of 169 interviews, including with

forty-six money exchangers, twenty-two businessmen, and ﬁfteen government ofﬁcials.3

I located my interlocutors through referrals from those in my personal network or people

I had already interviewed, a method referred to as snowball sampling (Biernacki and

Waldorf 1981; Atkinson and Flint 2001). I minimized selection bias by employing mul-

tiple snowballs simultaneously and interviewing individuals with competing interests,

like state and non-state actors, and I conducted follow-up interviews to account for

discrepancies. While I adopted an ethnographic method, my study of the bazaar is

not a traditional ethnography since I did not seek to provide a representation of the

social and cultural realities of the ﬁeld but, rather, sought to answer a set of questions

on normative ordering in the bazaar. My research is thus better considered as a contri-

bution to socio-legal scholarship that adopts an ethnographic approach (Flood 2005;

Coutin and Fortin 2015; Creutzfeldt, Mason, and McConnachie 2019). Order and

transformation are a consequence of individuals acting and making decisions in an

ever-changing world where macro-social structures exist but are susceptible to

alterations.4

3. Pseudonyms are used throughout this article for personal safety and privacy.

4. In this regard, my theoretical orientation aligns with theories on structuration. A concept intro-

duced by Anthony Giddens (1986), structuration views social structures as being brought to life by actions.

Margaret Archer (1996) advances this position by asserting that structures and actions transform one

another. Archer’s position thus validates interpretivism (see, for example, Geertz 1973) while also acknowl-

edging how widespread social structures inﬂuence behavior (see, for example, Parsons 1937; Durkheim

1982).

4 LAW & SOCIAL INQUIRY

The second section reviews the extant literature more closely, thereby positioning

the scholarly contribution of this study. The third section provides an overview of the

central money exchange bazaar—Sarai Shahzada—and explains the informal legal sys-

tem that has regulated the bazaar for much of its history. The fourth section details the

emergence of a written and codiﬁed set of rules—the “Statute”—and a centralized man-

agement structure—the “Union of Exchangers”—within the bazaar over the past two

decades. The ﬁfth section looks at how the interactions of the state and bazaar have

helped delineate the normative boundaries of the bazaar, thereby strengthening its

authority within those bounds. The sixth section looks at the functioning of the newly

formed Conﬂict Commission, the bazaar’s dispute resolution forum. The seventh sec-

tion brieﬂy considers the availability of state courts for resolving disputes. The ﬁnal sec-

tion concludes the article with a discussion on why formalization succeeded in

maintaining the autonomy of the non-state legal system of the bazaar.

THE TRANSFORMATION OF NON-STATE LEGAL SYSTEMS

It now seems trite knowledge that legal pluralism is widely pervasive in

Afghanistan, with state law, Islamic law, and customary law all playing a role in the

administration of justice (Ahmed 2007; Barﬁeld 2008; Wardak 2011; Wardak and

Braithwaite 2013; Choudhury 2014,2017; Khan 2015; Rahbari 2018). Afghan state

law itself is comprised of a patchwork of ofﬁcial enacted laws, rules derived from

Islamic law that are often contained in unofﬁcial manuals of Islamic jurisprudence,

and customary laws that supply state rules with normative meanings. More interesting

and less understood are the ways in which such differing legal systems transform over

time through their interactions with each other (Merry 1988; von Benda-Beckmann

and von Benda-Beckmann 2006). When legal systems come into contact, frictions

may arise due to competition for authority and conﬂicting propositions on how to deal

with problems (Tamanaha 2008; Swenson 2018).

Two bodies of scholarship highlight the interaction of state and non-state legal

systems within the same social space. The ﬁrst body can be broadly grouped as the pri-

vate governance literature (Stringham 2015; Richman 2017). These works, strongly

inﬂuenced by the ﬁelds of new institutional economics (North 1990) as well as law

and economics (Coase 1937; Ellickson 1991) became prominent in the 1990s when

diverse studies emerged on the ways in which close-knit communities governed their

activities based on their own rules rather than relying on public coercion. These studies

show how private communities may “opt out”of the state legal system (Bernstein 1992),

despite the latter being fully functional within society. Professional associations, such as

the National Food and Grain Association (Bernstein 1996) and the Liverpool Cotton

Association (Bernstein 2001), represent private communities that host their own sys-

tem of rules and coercion separate from the state legal apparatus. A common explana-

tion proffered is the existence of efﬁciency gains achieved by private coercion over state

courts (Richman 2004, 2332)—disputes are resolved quicker and more cheaply, rules

and remedies are tailored to meet industry needs, and reliance on the community avoids

difﬁcult questions on facts that a court cannot easily ascertain (for example, Bernstein

noted how, in the cotton industry, questions on varying grades of cotton are difﬁcult to

Order in the Bazaar 5

measure by industry experts, let alone by court ofﬁcials). A tendency within this schol-

arship has been to focus on private communities in highly developed states, where the

choice to avoid the state legal system seems anomalous. Conversely, in fragile settings,

the tendency has been to treat private coercion within close-knit communities as play-

ing a residual role in the absence of adequate state legal remedies (Fafchamps 1996;

McMillan and Woodruff 2000; Paquin 2012). The money bazaar provides an alterna-

tive narrative—namely, a non-state legal system whose autonomy and operations

depend on its interactions with the state.

A second body of scholarship that this study engages with is the literature on legal

pluralism, which concerns the “fragmented nature of authority”faced by many societies

“in relation to the administration of justice”(McConnachie 2014, 12). In many set-

tings, state law may not have a monopoly over legal authority and may not even be

the most inﬂuential system of legal ordering (Grifﬁths 1986; Merry 1988; Woodman

1998; Tamanaha 2008); rather, various non-state legal systems may command signiﬁ-

cant regulatory authority (Michaels 2005; Hertogh 2008,2009). Furthermore, legal plu-

ralism scholarship goes beyond simply advancing the existence of multiple legal orders

in a single social space by looking at the “dynamics of change and transformation”from

their contact with one another (Merry 1988, 879). As Boaventura de Sousa Santos

(1995, 464) contends, “more important than the identiﬁcation of the different legal

orders is tracing the complex and changing relationship amongst them.”

Afghanistan’s central money bazaar helps reveal what the mixing of legal systems looks

like in practice. The entanglements that draw legal systems into closer contact with one

another may also sharpen the distinction between them. Moreover, while legal systems

may borrow elements from one another, these transfers take on a new form when they

combine with the already existing legal structures of the recipient system (Englund

2006; Kurkchiyan 2009; Gillespie and Nicholson 2012; Chua 2015).

One of the insights from legal pluralism is that the contact of different legal systems

facilitates cross-contamination of norms and legal borrowing. Legal systems should be

treated as “semi-autonomous social ﬁelds,”to use Sally Falk Moore’s(1973, 720) clas-

sical concept, that “can generate rules and customs and symbols internally, but [that are]

also vulnerable to rules and decisions and other forces emanating from the larger world

by which it is surrounded.”Legal pluralism often entails ongoing interactions and legal

borrowing between systems, which are not immediately captured when taking a descrip-

tive snapshot of a particular social setting. For this reason, de Sousa Santos (1995) rec-

ommends that legal systems should not be studied in isolation; instead, emphasis should

be placed on “interlaw”or “interlegality”—that is, on how these systems function when

they interact with one another.

Certain non-state legal systems may be particularly well suited for receiving foreign

legal constructs. Reception of these foreign elements may be viewed as desirable if it

would strengthen the functioning of the recipient system. De Sousa Santos’s(1977,

54) study of a Brazilian favela reveals the borrowing of legal concepts from the state,

which helped to “(1) guarantee the normative survival of [the non-state legal system] in

a situation of legal pluralism in which the ofﬁcial law has the power to deﬁne normative

problems, but cannot solve them; (2) respond to social conditions and institutional

resources of the community that differ from those in the larger society that gave rise

to the ofﬁcial law.”Actors that are part of a private community may strategically deploy

6 LAW & SOCIAL INQUIRY

legal constructs originating from the state to achieve their own ends, such as consoli-

dating the authority of their legal system. While these transferred legal constructs bear

resemblances to the state legal system from which they originated, they are also trans-

formed as they adapt to the mores of the recipient non-state legal system.

Whether a legal system is able to persist during periods of transformation often

depends on whether it can maintain its boundaries and, moreover, its authority within

those boundaries. Karen Clay’s(1997) study of a coalition of traders in California (then

part of Mexico) in the 1830s argued that America’s annexation of the area allowed

merchants to rely on the state legal system; during this same period, the start of the

gold rush in the area led to crews deserting their ship in search of better opportunities.

Consequently, the reduced size and strength of the transportation-cum-information net-

work amongst traders weakened the effectiveness of the reputational sanctions within

the coalition, eventually causing its collapse. A study by Christopher Woodruff (1998)

found that Mexican shoe associations, at one time controlling two-thirds of the coun-

try’s shoe production, collapsed following trade liberalization, as retailers could choose

to buy not only from local manufacturers but also from foreign sources, thereby extin-

guishing the ability of these associations to coerce the behavior of retailers through

sanctions. Furthermore, when newcomers with their own practices or norms inﬁltrate

an otherwise self-regulating community, the latter may lose its ability to maintain order.

In his research on a ﬁshing community in Marseille, France, Florian Grisel (2021) found

that the inability of the incumbent community to assimilate its newcomers caused the

community to collapse since the social norms followed by the former failed to keep up

with new social practices introduced by the latter.

Afghanistan’s money exchange bazaar provides a vivid case study of how the inter-

action between money exchangers and state actors has helped maintain—and arguably

strengthen—the autonomy of the bazaar as a close-knit community following its own

system of rules. Studies on private governance in fragile settings tend to treat state and

non-state legal systems as substitutes (McMillan and Woodruff 2000); consequently, as

the state legal system gets stronger, it crowds out the legal systems of private communi-

ties. One notable exception is Shelby Grossman’s(2021) quantitative study of several

hundred market associations in Lagos, Nigeria, which posits that a predatory govern-

ment incentivizes private market communities to strengthen their non-state legal sys-

tems, thereby preventing the government from meddling in their affairs. In one sense,

Grossman’sﬁndings are consistent with the dynamics of order in my study since an

encroaching state initiated internal transformations within Kabul’s money bazaar.

However, Grossman’s study points to an antagonistic relationship between the state

and private markets, whereas, in the bazaar, the relationship is simultaneously antago-

nistic and collaborative.

Since 2001, money exchangers have faced pressures from an encroaching state that

risked undermining the bazaar as well as from recalcitrant exchangers who risked under-

mining public conﬁdence in the community. The bazaar’s contact with the state initi-

ated a set of transformations that helped consolidate its authority through the

formalization of its administrative structures. Consolidating its authority was a means

of addressing these threats. However, to say that the bazaar has maintained its indepen-

dence by opting out of the state, similar to various professional associations in other

settings (Bernstein 2001; Richman 2006) obfuscates the dynamics of change.

Order in the Bazaar 7

The ethnographic approach of this study helps track the seemingly contradictory behav-

ior of money exchangers, who at once opted out of the state legal system even while

relying on the state to support the functioning of the legal system of the bazaar.

Law possesses the ability to create images of society that “in turn impact upon soci-

ety at a discursive level and inﬂuence the way we think about and experience law”

(Banakar 2011, 13). While law and society research focuses on the constitutive role

of enacted law in producing categories and concepts through which the world is orga-

nized (Garth and Sarat 1998), the way this process plays out may be rather circuitous. In

Afghanistan, enacted state laws provide a template based on which exchangers have

developed and formalized the legal system of the bazaar. The formalization of non-state

law has transformed the behavior of exchangers as their affairs now rely on a combina-

tion of formal and informal non-state legal norms. Thus, like state law, non-state law

also possesses the capacity to recast society in its image by structuring the social world.

Exchangers have come to conduct their affairs in line with the new structures of their

non-state legal system, and, by ascribing to its rules, exchangers in turn legitimize its

authority.

In the discussion that follows, my goal is not to simply describe, but also to explain,

the transformations in the legal system of the bazaar. Exchangers have been able to

maintain the autonomy of the legal system of the bazaar by mimicking legal forms origi-

nating in the state; moreover, the process of transformation has entailed new operations

within the bazaar while also continuing to draw from prior regulatory practice.

A BAZAAR COMMUNITY

Kabul’s central money bazaar—Sarai Shahzada—is located on the path of the

Kabul River, just past Pul-e Bagh-e Omomi, an iconic bridge at the heart of the old

city. The four-ﬂoor building is otherwise indistinguishable from the many others

now competing in stature but for the thirteen billboards of various banks conspicuously

running across its rooftop. Its single entry gate, manned at all times by two police ofﬁ-

cers, leads into the economic heart of the country, the central money bazaar.5While

innumerous money exchangers—locally referred to as sarrafs—can be found throughout

Afghanistan, the bazaar houses the most prominent ones in the country. The roughly

four hundred shops spanning the four ﬂoors of the bazaar range in size from ﬁfty to one

hundred square feet and resemble small board rooms, seats lining their inside walls and a

large coffee table sometimes occupying the center space. Situated at the backend of

most ofﬁces is an elongated counter manned by one or two employees. A customer

approaches the employee the way one would approach a teller at a bank, the two often

separated by a glass barrier. The open-air conﬁguration of the bazaar permits ample sun-

light and fresh air, though rendering it wet and frigid through the winter months.

Within this simple yet vibrant setting, hundreds of millions of dollars circulate each

day, making it the ﬁnancial hub of the country.

5. Kabul also has a number of small exchange bazaars, ranging in size from ﬁve to ﬁfty shops. These

other markets predominately engage in currency exchanging, whereas exchangers in Sarai Shahzada also

engage in hawala transfers and credit ﬁnancing.

8 LAW & SOCIAL INQUIRY

By no coincidence, the central money bazaar sits adjacent to the famous street of

Mandawi, shorthand for the market of Kabul’s merchants and traders, roughly two

square kilometers in size and hosting thousands of private businesses. As a landlocked

country with a limited industrial and production sector, Afghanistan relies on neigh-

boring countries for its goods. Traders and merchants ensure that every possible good

is imported from abroad, from kitchen utensils, to luxury furniture, to electronics. The

affairs of Afghan merchants and money exchangers are deeply entangled as the former

rely on the latter for transferring funds to and from suppliers and customers located

abroad or across the country. Within the money bazaar, exchangers perform a variety

of transactions, including currency exchanges, money transfers, storing money for safe-

keeping and trade ﬁnancing (Choudhury 2021). The sizeable volume of trade with

nearby countries has caused many foreign currencies to be in circulation in the

Afghan market, and Afghan merchants rely on the foreign currencies provided by

exchangers to acquire their goods from abroad. People in Afghanistan also regularly

cross into neighboring countries, whether for work, medical services, or education, thus

requiring foreign funds.

Exchangers also offer loans; when a merchant has developed a relationship of trust

with an exchanger, he may be able to acquire credit from the exchanger, thereby allow-

ing him to expand the scale of his business. Money transfers are executed using a hawala

system (Choudhury 2021; Rahimi 2021). A hawala money transfer involves the coop-

eration of business partners in two distant locations. For example, an exchanger in the

bazaar may have a partner in Tajikistan. This partner will have some clients seeking to

send funds to Kabul and other clients waiting to receive funds from Kabul. The two

partners offset inﬂows and outﬂows of funds, such that, at the end of a given period,

only a small amount of funds needs to be transferred between them. When the two

need to offset funds, they may do so using bank transfers, through a trusted third party,

or even by physically transporting the funds.6As one exchanger explained to me with a

smile, “at the end of the day, there might be risks, but we’ll ﬁnd a way.”7The combi-

nation of exchangers in the money bazaar forms an extensive hawala network covering

the entire country and extending across many parts of the globe.

The precise economic scale of the bazaar remains unclear since no ofﬁcial ﬁgures

exist on the volume of funds in circulation. Nonetheless, some indications can be

adduced from related ﬁgures on the economy. Several times each week, the Afghan

central bank sells American dollars to exchangers through an auctioning process to soak

up excess local Afghanis from the economy. The total amount auctioned in 2017 was

approximately $2.1 billion.8Exchangers subsequently use these funds to perform trans-

actions across the economy requiring American currency. The signiﬁcance of this scale

of activity becomes evident when noting that the country’s annual gross domestic prod-

uct in 2017 was in the order of $20 billion and that the total holdings in all the

6. Hawala networks extend into dangerous areas of the country. Exchangers often shoulder the risk of

transporting funds into these areas through trusted third parties. The risks associated with operating in these

areas put a premium on their services.

7. Musadeq (money exchanger), interview by the author in Kabul, Afghanistan, February 2020.

8. Da Afghanistan Bank (DAB), Annual Report 1396 (2017). The DAB follows the solar hijri calendar,

and, thus, 1396 covers the period 21 March 2017 –20 March 2018. Based on my calculations for the year

2018.

Order in the Bazaar 9

commercials banks was $3.59 billion in the same year. Furthermore, the comingling of

licit funds with illicit funds from Afghanistan’s thriving opium economy—Afghanistan

is the largest exporter of opium globally, providing the country with approximately $1.4

billion in 2017—further increases the volume of funds in circulation within the bazaar.9

For most of its history, the bazaar has had no formalized process of dispute resolu-

tion since exchangers resolved their problems informally.10 The legal system of the

bazaar consisted of informal mediations involving the disputing parties and fellow

exchangers. If two exchangers had a problem, they would ﬁrst try to resolve the matter

between themselves. If the issue persisted, respected friends and elders in the bazaar

would be called upon to intervene. Within traditional Afghan society, when problems

arise between parties, the community often convenes a shura or jirga (a gathering of

respected elders of the community),11 whose members mediate a solution according

to community norms (Rubin 2002; Barﬁeld 2008). Through the shura/jirga structure,

elders can diffuse conﬂicts, thereby reconciling the parties and maintaining the overall

cohesion of the community. This traditional practice was pervasive in the bazaar as

respected exchangers would be called upon to mediate a solution based on community

norms.

The close-knit nature of the community facilitated two forms of community coer-

cion: reputational damage and social ostracism. Private communities in various settings

employ these sanctions to control the behavior of members and to punish recalcitrance

(Ellickson 1991; Bernstein 2001; Richman 2017). Close-knit communities facilitate the

“network effect,”which represents the potential for information to spread quickly to

community members (Katz and Shapiro 1994). Disputant parties face strong social pres-

sure to adhere to collective decisions as negative gossip could damage a party’s reputa-

tion and, in the extreme, may lead to the exclusion of that party from the community.

Exchangers in the bazaar depend on one another to carry out many of their transactions,

and, thus, community cohesion has been essential for their individual success. None of

the substantive rules or procedures were written or codiﬁed in any form since exchangers

adhered to prevailing community practices acquired through time and experience in the

bazaar. The respect wielded by elders helped mend rifts between parties, and the threat

of losing face before one’s peers coerced exchangers into adhering to their decisions. In

this way, exchangers were able to regulate their affairs without relying on the state legal

system. Only after 2001 did the informal legal system of the bazaar begin to transform

and take a new shape.

9. In this article, I do not focus on the role that exchangers and the money bazaar plays as a cover for

laundering funds from corrupt government ofﬁcials and the illicit opium trade. While I recognize that some

exchangers may engage in these activities, my study seeks to understand the running of the non-state legal

system of the bazaar. For the role of exchangers in facilitating the opium trade, see, for example, Thompson

2011.

10. Wahab (money exchanger), interview by the author in Dubai, United Arab Emirates, October

2017. This description of informally resolving disputes was repeated by some ten exchangers. Similarly,

in her study of Afghan hawala networks, Edwina Thompson (2011, 173) found that parties informally

resolved their disputes, as mentioned by one exchanger that she interviewed: “If someone does something

wrong to me, a few men will gather in my shop. ::: We settle the problem in maybe a few hours, or some-

times it takes a week.”

11. This gathering is normally attended exclusively by male community members.

10 LAW & SOCIAL INQUIRY

EMERGENCE OF THE UNION OF EXCHANGERS

The Need for Centralized Authority

The centralized management structure within the bazaar is a new phenomenon.

When the bazaar ﬁrst took up its current location in Sarai Shahzada in the 1950s, it

operated without an internal hierarchy.12 During those formative years and as the mar-

ket grew, one of the exchangers—an individual well respected by the shops—would be

informally selected to serve as their “head,”although the position held no formal

authority and lacked a clear mandate. Reﬂecting on the bazaar in the 1980s and

1990s, one exchanger remarked: “They [that is, the head exchanger] like to make

speeches here and there, but they didn’t really do anything.”13 The core preoccupation

of exchangers back then—as it is now—was to facilitate the transactions of their cus-

tomers, which provided exchangers with their income. The head exchanger would help

resolve disputes in the bazaar or respond to requests from the government with the

interests of exchangers in mind. However, he was otherwise uninvolved in the day-

to-day transactions of exchangers. No evidence exists of any management structure

within the bazaar prior to 2001.

Starting in late 2001 following the fall of the Taliban government, money started

entering the country at a rate previously unfathomable (Bizhan 2018b). Projects by

international actors, NGOs, and the Afghan government mushroomed nationwide,

requiring a system that could facilitate the movement of funds (Maimbo 2003;

Thompson 2011). Consequently, exchangers became clearinghouses for funds being

transferred to all parts of Afghanistan. The size of the bazaar quickly swelled, as new

exchangers opened shops to partake in this surge in activities. Around 2001, exchangers

held their ﬁrst elections to choose a president who would represent their interests as

needed.14 This elected head was responsible for representing the collective interests

of exchangers, particularly in relation to the burgeoning government. Beyond this gen-

eral responsibility, the position lacked a clear mandate. Disputes in the bazaar continued

to be resolved by respected exchangers. Edwina Thompson’s(2011, 173) interview with

an exchanger in the bazaar in 2005 reveals the limited authority of the hierarchal man-

agement structure of the bazaar: “We have heard of this group of men who call them-

selves the ‘Money Exchange Dealers’Association’, but laugh at them for they have no

power. They like to give themselves titles so that the international community will go

and speak with them and consider them important. The reality is different.”

With the steady growth of the country’s economy, the number of exchangers in the

bazaar quickly increased; however, these new economic opportunities also entailed new

12. The current location of the bazaar dates back to 1957, consisting of three or four Afghan Jews.

Afghan Hindus and Sikhs entered the bazaar by 1960 and soon overtook the market through their ﬁerce

competition. When the Communist government took over Afghanistan in 1978, the Afghan Hindus and

Sikhs withdrew from the market, at which time it was taken over by Afghan Muslim exchangers. For infor-

mation on the bazaar’s functioning up until the 1970s, see Fry 1974.

13. Wahab (money exchanger), interview by the author in Dubai, United Arab Emirates, October

2017.

14. Amongst the exchangers I talked to, there was disagreement over whether these elections com-

menced in 2001 or 2002. However, all agreed that it was sometime soon after the fall of the Taliban.

Order in the Bazaar 11

market woes. The bazaar came under pressure from two directions: the government and

the exchangers themselves. Government institutions slowly strengthened and sought to

bring activities across society under their control, including the affairs of money

exchangers (Maimbo 2003). One potential means of accomplishing this goal was

through registration. Registration would allow the government to identify exchangers,

with the goal of eventually monitoring their transactions. The government faced pres-

sures from the international community to monitor illicit transactions associated with

the opium trade and the ﬁnancing of terrorism, some of which was channeled through

the bazaar (though the precise volume was unclear) (Thompson 2011). Registration

and subsequent monitoring would be one method of identifying the ﬂow of illicit funds.

Furthermore, the near collapse of Kabul Bank in 2010 due to fraudulent activities by its

banking ofﬁcials put further stresses on the entire ﬁnancial sector (Higgins 2010), with

the government and the international community realizing that the Afghan central

bank—Da Afghanistan Bank (DAB)—needed to monitor the country’sﬁnancial insti-

tutions more strenuously, including the activities of money exchangers given their cen-

tral role in ﬁnancial transactions and mediation.

Exchangers also faced mounting pressures internally from the nefarious activities of

certain exchangers within their ranks, which risked damaging the image of the entire

bazaar. The functioning of the bazaar depends on people across society having trust in

money exchangers as a collective. The strong reputation of many, if not most, exchang-

ers bolsters the overall reputation of the bazaar and the trust that people have in it. This

trust may be considered to be a form of collective social capital that increases through

the reputation of the exchangers and the expansion of the geographic networks created

by their cooperative efforts (Coleman 1988; Putnam 1993). New exchangers in the

bazaar automatically gain access to this social capital, which raises the problem of free-

riding—that is, beneﬁting from communal resources without making any contribution.

A deceitful exchanger can potentially reap signiﬁcant gains by abusing the trust afforded

to him by virtue of his association with the bazaar. Unfortunately, such problems have

arisen in the past. Certain exchangers have run off with funds, leaving their investors

without any recourse. Others were caught dealing with proceeds from the opium trade,

even catching the attention of the Central Intelligence Agency (Rosenberg 2011).

The relationship between the bazaar and the proceeds of illicit funds is complex.

While every exchanger who I interviewed recognized that some exchangers dealt with

such funds, none had any way to quantify the volume of such activities. Previous studies

have shown exchangers in different parts of Afghanistan to be complicit in the transfer

of drug money (Thompson 2011). When people associate exchangers with illegal activ-

ities, it harms the overall reputation of the bazaar, leading to a loss in customer conﬁ-

dence. Exchangers dealing with funds from illegal sources—whether from the opium

trade or corrupt government ofﬁcials—risk having their money seized by the govern-

ment. To escape government detection, some may choose to abscond without notice.

Consequently, their customers risk losing their funds or alternately having them

detained by the government pending a lengthy investigation. Particularly unlucky cus-

tomers may ﬁnd themselves the target of government questioning and suspicion. Such

activities weaken overall public conﬁdence in the bazaar, adversely affecting all

exchangers, especially those who avoid dealing with funds from illicit sources

and instead focus on mundane ﬁnancial transactions—even if unregulated or

12 LAW & SOCIAL INQUIRY

under-regulated—from currency changing, to hawala money transfers, to credit ﬁnanc-

ing, to providing savings accounts. Exchangers have a valid reason to be concerned

about the behavior of fellow exchangers—if clients cease to trust exchangers or if

exchangers lose trust amongst one another, their entire system would risk collapse.

The Union of Exchangers (the Etihadiya) emerged in 2010 as a response to these

mounting pressures against exchangers. Several senior and long-standing exchangers

from different ethnic backgrounds came together with the intent of addressing these

problems by collectively organizing. These exchangers had been operating since the fall

of the Taliban (and many had been in operation even prior to this time) and thus were

witness to the changes taking place within the bazaar. For them, establishing a formal

management structure would provide a means of both protecting exchangers against

government intrusions as well as regulating the behavior of exchangers. Such a structure

would also provide incumbent exchangers with greater control over new market

entrants and, thus, the overall reputation of the bazaar. One of the founding members

of the Union explained its underlying rationale: “Establishing the Union was important

for two reasons: ﬁrst, because we needed to centralize authority to represent 400 ofﬁces

and solve their problems and those of their customers. Second, with the Union, money

exchangers would be less vulnerable to unfavorable demands of the Central Bank.”15

Up until the emergence of the Union of Exchangers, the actions of exchangers

were uncoordinated. No organizational structure existed that could help mobilize col-

lective action. Prior to 2001, a lack of centralized authority was not particularly conse-

quential for exchangers given the lack of organization of the state as well as the

comparatively limited volume of funds passing through the bazaar. However, after

2001, the sweeping changes in Afghan society generally, and within the bazaar speciﬁ-

cally, placed the activities within the bazaar at the center of state-building efforts. These

changes risked destabilizing the operation of the bazaar. An informally elected president

without a clear mandate had insufﬁcient ability to represent exchangers before the gov-

ernment as the scope of his roles and responsibilities remained unclear. Furthermore,

exchangers had limited ability to control the actions of other exchangers, even if dubi-

ous actions of the latter could affect the overall image of the bazaar. Exchangers viewed

the creation of a management structure as a means of countering these different pres-

sures. Exchangers in the bazaar already constituted a close-knit community with com-

monly understood norms and practices. A centralized body could help coordinate

different functions amongst exchangers, whether resolving disputes or speaking to gov-

ernment ofﬁcials with a uniﬁed voice. Such a body would ensure that decision-making

authority on matters relating to their affairs would remain within the bazaar.

A few exchangers voiced somewhat expected reservations about a proposed man-

agement structure—namely, the fear that their business activities may be affected by the

existence of a union.16 These exchangers were concerned that changes placing them

within a larger bureaucratic structure may interfere with their abilities to transact with

clients. Others were concerned that a union would be susceptible to ethnic politics and

polarization, with dominant groups seizing power and promoting their own interests,

15. Abdul Sami (money exchanger), interview by the author in Kabul, Afghanistan, February 2018.

16. Khalil (executive of the exchanger Union), interview by the author in Kabul, Afghanistan, March

2018.

Order in the Bazaar 13

quite possibly to the detriment of other exchangers. A management structure would

change the power dynamics within the bazaar by providing some with greater deci-

sion-making authority on certain matters. Avoiding potential power struggles required

specifying those matters that fell under the authority of the management structure and

ensuring that the latter encapsulated the collective interests of exchangers. In this way,

a central structure could foster collaboration and strengthen trust between exchangers

rather than trigger divisive politics.

While concerns existed over centralization, exchangers shared a common concern

about the mounting pressures on the bazaar and, thus, the need to collectively strategize.

Essential in establishing the Union of Exchangers was its endorsement by long-standing

exchangers from different ethnic groups—Pashtun, Tajik, Hazara, and Uzbek.17 These

exchangers often held inﬂuence amongst members of their own ethnic group in the

bazaar, and, thus, their endorsement helped promote the idea of a centralized body

and encouraged its widespread acceptance. Furthermore, given the relatively small size

of the bazaar, all exchangers possessed the ability to partake in the discussions on the

merits and demerits of establishing a union.

Through an eventual vote involving all the exchangers in the bazaar, the govern-

ing Statute—the Asasnamah—was drafted in 2010 and breathed life into the central-

ized Union of Exchangers.18 The ﬁnal approval of the Statute transformed the bazaar

from an informally organized market to one that was formally constituted with a cen-

tralized body—namely, the Union of Exchanger—which was responsible for overseeing

the activities of the bazaar while remaining minimally intrusive in the day-to-day activ-

ities of exchangers. The Union serves as the ofﬁcial representative body for all exchang-

ers in the bazaar in discussions with the government on matters affecting the

functioning of exchangers. Furthermore, the Union also unofﬁcially represents

exchangers in other bazaars throughout the country, as their interests are encapsulated

by the Union even if they are not formally members (as formal membership in the

Union is limited to those located in the central money bazaar).19

Drafting the Statute of the Bazaar

Establishing a centralized, administrative body involved drafting a set of rules out-

lining its roles, responsibilities, and operating structure. A handful of stalwart exchang-

ers from different ethnic backgrounds led these efforts as they not only had foresight

from being in the market for many years but also the trust and respect of fellow exchang-

ers. Exchangers in the bazaar participated in a communal session that set into motion

the drafting of rules:

17. In mid-2018 during my ﬁeldwork, of the roughly four hundred shops in the bazaar, approximately

half had Pashtun owners, 150 had Tajik owners, forty had Hazara owners, and ten had Uzbek owners. These

ﬁgures change regularly.

18. Asasnamah (Statute of the Union of Tellers and Money Exchangers for Sarai Shahzada in Kabul),

2017 (Statute). There is disagreement on whether its ﬁrst draft was adopted in 2010 or 2011. The ofﬁcial

Statute is bilingual, written in both Dari and Pashto languages.

19. Other exchangers in the country informally look to the Union to represent their interests.

However, only exchangers with physical shops in the central money exchanger bazaar vote in the elections

of the Union and serve on its committees.

14 LAW & SOCIAL INQUIRY

The four hundred exchangers participated in a big session and selected only

ten people to write the Statute for the Union. All articles of the Statute were

studied carefully in order to represent the best interests of exchangers, and this

Statute was conﬁrmed by the majority of exchangers. Exchangers were not

against establishing a union because the decision was made based on the

necessities of Sarai Shahzada. Economic issues are included in the Statute,

but there are not any political issues included in the Statute. All exchangers

accepted the Statute, as it was made by the consent of every exchanger here.20

During this drafting process, one of the principal concerns amongst exchangers was the

precise mandate of the Union as skeptics and those reluctant to vest authority in a cen-

tralized body sought to ensure that its functions were clearly deﬁned: “Disagreements

over the responsibility of the president of the Union, conditions of the presidency,

authorities of commissions, and rights and responsibilities of members were among

the key challenges during drafting.”21 While exchangers in the bazaar drove the drafting

process, it also involved the input of professors and lawyers who helped with the word-

ing of the text.22 To ensure widespread support and avoid potential divisiveness, par-

ticular attention was placed on ensuring a completely apolitical tone in the rules that

would not favor any subgroup or person. Exchangers already understood the importance

of working beyond ethnic boundaries for the success of their trade. In day-to-day life,

exchangers harboring animosity toward other ethnic groups still expressed their open

willingness to work with members of those groups if a transaction required it

(Thompson 2011). Such an approach facilitated the strongest and most widespread eco-

nomic network, which was beneﬁcial for all exchangers. All exchangers understood

their common interests, and they all sought protections against government intrusion.

Likewise, they sought to protect themselves from recalcitrant exchangers as well as the

general insecurities associated with dealing with so much cash.23

Even after the approval of the Statute in 2010 by exchangers, members of the

Union continued to seek the input of government ofﬁcials to reﬁne its wording.

The Statute was shared with the government speciﬁcally to receive input on the coher-

ence of its wording as well as its consistency with the enacted provisions of law, par-

ticularly those of the central bank: “We drafted the statute and shared it with the

Ministry of Justice of Afghanistan. We discussed the law with the lawyers of the

Ministry to conﬁrm the consistency of the draft law with other laws of Afghanistan,

and they approved and passed the drafted law.”24 As another exchanger explained,

“we established the rules in order to work in a legal framework and meet the require-

ments of the Central Bank’s Audit Department.”25

The Ministry of Justice provided its legal expertise to conﬁrm that the letter of the

law coincided with the collective interests of the exchangers and that all the provisions

20. Karmal (executive of the Union of Exchanger), interview by the author in Kabul, Afghanistan,

December 2017.

21. Haji Khan (money exchanger), interview by the author in Kabul, Afghanistan, November 2017.

22. Mashal (money exchanger), interview by the author in Kabul, Afghanistan, February 2018.

23. Daanish (money exchanger), interview by the author in Kabul, Afghanistan, December 2017.

24. Khodadad (executive of the Union of Exchangers), interview by the author in Kabul, Afghanistan,

December 2018.

25. Haji Khan (money exchanger), interview by the author in Kabul, Afghanistan, November 2017.

Order in the Bazaar 15

of the Statute were consistent with government laws and regulations. These efforts by

the ministry were not viewed as unduly intrusive but, rather, materialized at the behest

of the Union since the latter sought to strengthen the authority of its constituting

Statute by ensuring that it was cast in a legal form and that it had the approval of ofﬁ-

cials at the ministry. While the Union executive remarked that the Ministry of Justice

“passed the draft law,”the ministry did not present the draft Statute before the Afghan

Parliament (the body responsible for enacting legislation); however, in approving the

wording of the Statute, the ministry provided state-sanctioned legitimacy to the Statute.

In 2017, a booklet containing the ﬁnalized version of the Statute was published by the

Union in both Dari and Pashto languages, the two most widely spoken languages across

the country and within the bazaar. Its introduction included the endorsements of not

only the Union but also the Ministry of Justice and the Afghan president, Ashraf

Ghani. The Statute is the end result of nearly a decade of efforts to create a centralized

management structure governed by a formalized set of rules.

From Legal Informality to Formality in the Bazaar

The published Statute clearly resembles enacted government laws or regulations.

Written with clarity and organization, its thirty-ﬁve articles spread over ﬁve chapters

provide details on the objectives of the Union,26 the rights and obligations of mem-

bers,27 and the organizational structure of the Union.28 The Statute emphasizes the

moral responsibilities of the Union, which must “support national interests,”“defend

the national values of Afghanistan,”and “defend human rights in accordance with

Afghan morals and Islamic principles.”29 Extensive details on the elections process

and the responsibilities of the president of the Union address the concern raised by

many exchangers during the drafting phase that the Union’s leadership roles needed

to be clearly deﬁned.30 The Statute also details the functions of the ﬁve standing com-

mittees—referred to as “commissions”—where some of the more low-key, but still vital,

activities of the Union occur (as explained later in this article, the Conﬂict Commission

is the one exception as it is anything but low key).31 Throughout the Statute, exchang-

ers are called upon to uphold camaraderie, unity, and equality.32 Members have an obli-

gation to “legally object to social injustice, corruption, and cruelties”and to prefer

“national interests”over sectarianism. The Statute also emphasizes the equal rights

of all members regardless of their background. The apolitical tone of the Statute under-

scores the objective of providing a structure that is capable of bringing together

exchangers of all backgrounds (ethnic, political, religious, and otherwise) and protect-

ing their collective interests.

26. Statute, Art. 7.

27. Statute, chap. 3.

28. Statute, chap. 4.

29. Statute, Art. 7(15).

30. Statute, Art. 22.

31. Statute, Arts. 23–33. The ﬁve commissions are: communication, ﬁnance, culture, election, and

conﬂict resolution.

32. Statute, Arts. 9, 14(1).

16 LAW & SOCIAL INQUIRY

Nonetheless, despite its outward legal form, blessings from the Ministry of Justice

and the president, and commanding authority amongst exchangers, the Statute does not

represent a piece of enacted legislation or regulation that has been promulgated by the

government or one of its organs. Rather, it is the outcome of the bazaar and the

exchangers operating within it. It traces its authority to the support that it receives from

the community of exchangers in the bazaar. Its very existence is the result of exchangers

working to ensure that they maintain control over their affairs. The Statute helps pro-

tect exchangers from undue interference from the state. Even as a non-state law, the

Statute is much more authoritative than many enacted state laws, the latter of which

often gain limited traction in practice (Choudhury 2017). The Statute plays a recog-

nizable role by bringing the Union and its committees into being and shaping a number

of the activities of exchangers.

Through the enactment of the Statute, the legal system of the bazaar has trans-

formed from an informal system to one hosting a centralized body whose bureaucratic

structure operates according to a formalized set of rules. This transformation has

occurred because of changing market conditions and changing relations with the state.

The burgeoning state’s presence presented both challenges and opportunities for

exchangers. On the one hand, the state’s greater regulation of exchangers threatened

their ability to carry out their transactions freely. On the other hand, the rapid efforts at

formalizing aspects of the state’s legal system provided a window of opportunity for the

bazaar to develop its own legal structures. The Statute is simultaneously a response to

the encroaching presence of the state and a reﬂection of the legal formality associated

with the state. International state-building efforts in Afghanistan have led to an expan-

sion of the legal system through the enactment of a myriad of laws and regulations,

including those that apply to the banking system and ﬁnancial institutions.33 A promi-

nent feature of the Afghan legal system has become the prevalence of enacted, written

laws. For its part, the bazaar legal system has operated without formal rules throughout

much of its history. Its recent transformation toward a formalized set of rules mimics the

structure of the codiﬁed and formalized state legal system. Law’s malleability in the

bazaar—its ability to transform according to circumstances—has allowed exchangers

to mimic state efforts to assert its authority by enacting its own set of private rules.

The Statute represents the reception of a particular aspect of the state legal system into

the bazaar—namely, the formalization of rules into a written and codiﬁed form.

What has occurred in the bazaar is not the “formalization of law”in the sense of

non-state laws being integrated into the enacted laws of the state but, rather, the trans-

formation of the bazaar’s legal system through the codiﬁcation of its rules. In certain

settings, the state legal system may incorporate non-state legal practices into laws or

legal structures of the former, sometimes referred to as “formalizing the informal”

(De Soto 1989). Eric Feldman’s(2006) study of the tuna court in Tokyo represents

one such community whose norms were absorbed into the state legal system as the tuna

court is an organ of the state. Similarly, colonial regimes that transplanted Indigenous

laws into their legal systems had the effect of transforming non-state laws into state laws

(Gluckman 1973). The changes occurring in the bazaar are distinct. In mimicking a

particular legal form—namely, written and codiﬁed rules—associated with the state

33. For a list of some of these laws, see the DAB website, https://dab.gov.af.

Order in the Bazaar 17

legal system, exchangers have been able to consolidate and bolster the autonomy of the

bazaar’s legal system. The exercise of developing, enacting, and implementing the

Statute has transformed the informal legal system of the bazaar into a system consisting

of formalized rules that are widely supported by exchangers and approved by the

Ministry of Justice. The Statute has breathed life into the Union, which has centralized

the activities of the exchangers that had previously been dispersed and imprecise. Thus,

just as the state legal system has been developing over the past number of years, so too

has the bazaar’s legal system, and, in doing so, the latter has been able to maintain its

autonomy.

The Statute helps delineate the boundary between the bazaar and the state. By

better deﬁning its own internal operating structure, the Union has been able to assert

authority over the activities taking place in the bazaar while emphasizing the relation-

ship between the Union and the government. The Statute declares the Union to be

independent of the central bank and other organs of the state.34 Furthermore, the

Statute empowers the Union to work with the government to implement policies ben-

eﬁcial to exchangers.35 Any problems arising within the bazaar are to be dealt with by

the Union and should only exceptionally, and at its own behest, be referred to the

state.36 The Union is also responsible for supporting exchangers who face legal claims

raised by the state.37 One of the stated objectives of the Union is to work with the

central bank to facilitate the smooth running of the market,38 which includes cooper-

ating with the central bank in assessing the application of exchanger licenses39 and

implementing its procedures such as ensuring that exchangers record their transac-

tions.40 As explained in the following section, the central bank requires exchangers

to possess a license to operate, and the Union helps ensure this rule is upheld.

Thus, the bazaar sustains a level of autonomy from the state even while maintaining

ties that facilitate cooperation.

Following the publication of the booklet containing the Statute in 2017, the cen-

tral bank introduced a new article into its own regulation on money exchangers recog-

nizing the Union as the “competent body”of money exchangers.41 This article

recognizes the jurisdiction of the Union to operate according to its own administrative

structure and to deal with disputes that arise internally. At the same time, the regulation

also requires the Union to comply with the laws and regulation of the central bank, to

report any breaches to the latter, and to only grant membership to exchangers who have

obtained a license from the central bank (discussed below). The regulation thus afﬁrms

the complementary, yet competing, roles of the Union and the central bank. The latter

not only conﬁrms a zone of authority controlled by the former but also instructs the

34. Statute, Art. 34.

35. Statute, Art. 35.

36. Statute, Art. 7(4).

37. Statute, Art. 19.

38. Statute, Art. 2.

39. Statute, Art. 7(9).

40. Statute, Art. 7.

41. Muqarara Tanzim Fa-aliat hai Sarrafan va Fraham Konandagan Khidamat Puli (Regulation of the

Activities of Money Exchangers and Money Service Providers), Doc. 1398/2019, Art. 56 (Money Exchanger

Regulation).

18 LAW & SOCIAL INQUIRY

Union to report violations of laws and regulations, thereby claiming jurisdiction over

such matters.

It bears mentioning that, while the Statute has introduced a level of formality and

organization into the bazaar, the extent to which it directly regulates the affairs of

exchangers should not be overstated. Unlike many professional codes of private asso-

ciations that supply the substantive rules to be followed by its members, the Statute is

mostly procedural, containing limited substantive directives. Its principal focus is on the

organizational structure of the Union. Its substantive details are limited to the general

roles and responsibilities of the Union and the Union’s relationship with exchangers

and government bodies. However, the Statute provides no direction on the substantive

rules that should be followed by exchangers and other parties who transact within the

bazaar. Despite the absence of formal rules prescribing such behavior, the Statute estab-

lishes an administrative body within the Union—the Conﬂict Commission—which is

responsible for resolving disputes, a task that this commission has been successful in

discharging. Thus, while the Statute represents a major transformation in the bazaar,

it cannot be viewed as a total break from the past since informal legal practices continue

to supply the meanings through which the Statute is understood and implemented.

LICENSING THE BOUNDARIES OF THE UNION

The efforts by exchangers to protect their interests by developing a Statute par-

tially explains the ability of the bazaar legal system to maintain relative autonomy from

the state. However, just as important has been the role of the government in both sup-

porting the Union’s jurisdictional claim over matters arising in the bazaar and control-

ling the licensing of exchangers, which has helped to ensure the cohesion of the bazaar.

One of the reasons non-state legal systems collapse is their inability to maintain their

boundaries (Clay 1997; Richman 2017; Grisel 2021).

As money exchanging often involves the handling of sizeable volumes of funds, the

central banking authority has always had its eye on the ability to monitor these activi-

ties (Maimbo 2003). Particularly since money from the black market can cycle through

the bazaar virtually undetected, monitoring would provide a means of identifying and

potentially preventing such practices. In 2002, the central bank began registering the

licenses of money exchangers (Bennett et al. 2003),42 and, in 2008, it enacted a regu-

lation requiring exchangers to hold a government license. One of the challenges faced

by the central bank was that, up until that point in time, it did not have a means of

forcing exchangers to maintain licenses. While Afghanistan has had a central bank

since the 1930s, only after 2001 did it develop many of its functions as a monetary

authority. Up until 2001, the central bank was viewed as marginal, making it difﬁcult

to assert its authority over exchangers who possessed a long and established history in

the country. Even after 2001, with government resources stretched and lacking author-

ity, rigorous monitoring and enforcement of penalties against powerful exchangers, who

played a crucial role in supporting the economy, was not a viable strategy. On another

42. Previous to this, licenses were registered by the Department of Foreign Relations. However, the

requirement of registration itself was highly incomplete as indicated by the lack of personal data on

exchangers.

Order in the Bazaar 19

level, the central bank also faced the challenge of being able to assess the appropriate

qualiﬁcations of an exchanger since exchangers themselves, rather than central bankers,

would be most capable of making this judgment.

The approach taken by the 2008 regulation helped address both challenges—

namely, the limited authority of the central bank and its limited capacity to gauge

the skills of exchangers. The regulation speciﬁed that anyone seeking a license was

required to have the reference of two businesspeople.43 This approach of requiring

two guarantors shifted control over the licensing of new exchangers from the central

bank back to the business community. The business community thus retained control

over a signiﬁcant part of the licensing process. This approach strengthened the author-

ity of the central bank since businesses, in guaranteeing exchangers, ended up consent-

ing to the requirements of the regulation. This approach also shifted the responsibility

of assessing the qualiﬁcation of an exchanger to the business community.

The 2008 regulation materialized in the period during which exchangers were

working to consolidate their own set of rules for the bazaar. To maintain control over

entry into the market, these exchangers made it a requirement for all exchangers to

possess a valid license from the central bank,44 which in turn meant that new exchang-

ers would need to be guaranteed by fellow businesses. In this way, exchangers were able

to deploy central bank regulations to limit unlicensed exchangers, while the bank

beneﬁted from an uptake in licenses. As time progressed and the central bank increas-

ingly beneﬁted from working with exchangers, the bank began requiring that the guar-

antors be exchangers themselves (rather than any licensed business).45 As a result,

whereas, in the past, membership into the profession was informally regulated by an

exchanger’s ability to acquire the requisite resources from their personal community

and gain the trust of clients and fellow exchangers, the new Statute of the bazaar,

as well as the central bank licensing regulations, made it a requirement that new

exchangers be guaranteed by existing license holders, providing exchangers a high level

of control over the composition of community membership.

The current composition of the bazaar is a direct result of the control held by

incumbent exchangers. Exchangers consist of a small community whose membership

is limited by those who are already members. Exchangers have an interest in denying

membership to anyone who they perceive to be deceitful since the entire profession

depends on people having trust in the community as a whole. New community members

may also be a source of competition that may otherwise be avoided. Serving as guarantor

is viewed as a serious role as it means that the exchanger is willing to put his own repu-

tation on the line for another party: “It is very difﬁcult for someone to guarantee you in

Sarai Shahzada, without any close relationship and recognition. And it is clear to every-

one that without any recognition nobody will dare to guarantee you because a guarantor

has some responsibilities. ::: If the exchanger runs off with money, the guarantor must

bring him back to the Etihadiya and this is his responsibility.”46

43. Regulation of the Islamic Republic of Afghanistan: Da Afghanistan Bank, 8–9 July 2008, Part B:

Issuance of License, s. 1.2.1.

44. This is currently reﬂected in articles 7(10) and 8 of the Statute.

45. This later became a formal requirement in subsequent central bank regulations on money exchang-

ers. See Money Exchanger Regulation, Arts. 8.1.9, 9.1.6.

46. Daanish (money exchanger), interview by the author in Kabul, Afghanistan, December 2017.

20 LAW & SOCIAL INQUIRY

Whether a guarantor bears ﬁnancial responsibility for a deceitful exchanger is

ambiguous. Exchangers across the market emphasized that “guarantors guarantee only

an exchanger’s name but not their property. ::: Nobody will provide a guarantee for

the money but some of the exchangers are guaranteeing only the names of other

exchangers.”47 Neither the Statute nor the central bank regulations speciﬁcally hold

exchangers responsible for the actions of the parties they guarantee. However, exchang-

ers noted that the case could go to court where the “decision will be applied on the

guarantor of the person and the court will order the person to pay the money for

him.”48 Furthermore, if the deceived party is powerful, he may demand repayment from

the guarantor, and “he will pay him”to avoid problems.49 Thus, exchangers are cautious

in providing guarantees, and if at any point they lose conﬁdence in the party they have

guaranteed, they may revoke their guarantee by reporting it to the Union (and the cen-

tral bank). Obtaining a license requires strong personal ties with existing exchangers.

While it promotes community cohesion, it also poses a signiﬁcant barrier to entry for a

party who may otherwise have the skills and ﬁnances to work as an exchanger but who

lacks strong personal ties required to ﬁnd a guarantor.50

The reliance by exchangers on licenses from the central bank gives the bank the

authority to monitor the activities in the bazaar. Once a year, a group of inspectors from

the central bank enters the bazaar to monitor exchangers. These inspectors ensure that

exchangers have properly renewed their licenses, that they are bookkeeping their trans-

actions in the ledgers provided by the central bank, and that sizeable transactions have

been documented with all of the relevant information about their customers collected

and reported.51 They also try to ascertain whether exchangers are engaged in any unau-

thorized activities. At this point, a game of cat and mouse begins. Both exchangers and

the central bank depend on one another just as they also aim to assert and expand their

authority. When the inspection team enters the bazaar, before commencing their work,

they ﬁrst visit the ofﬁce of the Union to inform its members of their visit. As one central

banker and previous member of the inspection team asserted: “This is not to take per-

mission but rather to inform them that we are doing our work in the bazaar.”52

However, members of the Union perceive this visit differently: “They ﬁrst come to

the Union to get our permission. Then they start working.”53 Each side upholds a con-

venient interpretation that allows it to claim its authority. Regardless of who is more

correct, one certainty rings true throughout the bazaar: “As soon as they [that is, the

47. Naeem (money exchanger), interview by the author in Kabul, Afghanistan, December 2017.

48. Khalil (executive of the exchanger Union), interview by the author in Kabul, Afghanistan, March

2018.

49. Nesar (money exchanger), interview by the author in Kabul, Afghanistan, January 2018.

50. This barrier is partly offset by market realities. A party is usually able to build social ties over time

with an exchanger, up to a point where an exchanger is willing to guarantee them.

51. Money Exchanger Regulation, Art. 37 requires that transactions above 500,000 Afghanis (approx-

imately US $6,500) must be reported to the Afghanistan Financial Transactions and Reports Analysis

Center of Afghanistan. According to Art. 34 of the Money Exchanger Regulation, exchangers must collect

information on their customers. For transactions below 50,000 Afghanis, the name, address, and phone

number of the customer should be collected. As the amount transacted increases, the exchanger should

collect further information including their citizenship card, passport, driver’s license, the source of funds,

and the intended use of the funds.

52. Mir Jahan (DAB ofﬁcial), interview by the author in Kabul, Afghanistan, November 2017.

53. Naeem (money exchanger), interview by the author in Kabul, Afghanistan, December 2017.

Order in the Bazaar 21

inspection team] enter, every shop knows they are here.”54 In the time that it takes for

the inspectors to climb the four ﬂights of stairs to reach the ofﬁce of the Union and

deliver their entry pleasantries, every shop has swiftly stored away any documents they

do not want noticed. One exchanger remarked: “I remove the laptop that I use for all of

my transactions from the ofﬁce table and leave only the transaction book.”55 Another

said: “My neighbor comes into my shop with some of his transaction books and asks me

to hide them for him.”56 When the inspectors begin their work, exchangers have had

ample time to prepare themselves.

Exchangers prepare themselves for these visits well in advance, often providing

monthly records of their transactions to the central bank over the course of the year

and maintaining a book of transactions speciﬁcally for inspectors. One exchanger

explained the preparation that goes into visits by the inspectors:

We tell the DAB [that is, the central bank] that we have 2,100 hawala in one

month. We report ten as being big and give the information to the DAB. We

give this information monthly. For these [ten big transactions] we give the

correct client information like passport or ID. The other 2,090 we don’t need

to report because they’re small. For these, we write fake information in a book.

Imaginary names and hawalas. We have two books, one book with the fake

hawalas and another book that we use for business. Inspectors only see the

fake book. In reality, we have maybe 3,000 hawala in one month, and much

more than ten are big.57

By providing information on a monthly basis to the central bank on a number of hawala

transactions, this exchanger avoided undue suspicion from inspectors, as his transac-

tions ﬁt within what inspectors would consider a “reasonable”level of activity.58

Nonetheless, the exchanger deliberately misrepresented the transactions carried out

at his shop by underreporting the number of large transactions and providing a fabri-

cated book of small transactions. In this way, the exchanger fulﬁlled the requirements of

central bank inspectors while, at the same time, preventing those ofﬁcials from being

able to gauge the actual level of activity of his business and the identity of his clients.

Exchangers are able to employ such strategies to maintain a level of independence from

inspectors even while maintaining their government licenses that grant them permis-

sion to perform money-exchanging services.

The inspection team for its part seeks to maximize the effectiveness of its work by

relying on the element of surprise. An inspector noted: “We may go from one shop on

the ﬁrst ﬂoor to a shop on the third ﬂoor next.”59 With some 400 shops in the bazaar

and each inspection requiring ten to thirty minutes, the team may complete only twenty

54. Homayoun (money exchanger), interview by the author in Kabul, Afghanistan, March 2018.

55. Edris (money exchanger), interview by the author in Kabul, Afghanistan, January 2018.

56. Mashal (money exchanger), interview by the author in Kabul, Afghanistan, February 2018.

57 Abdul Ghafoor (money exchanger in Kabul, Afghanistan), phone interview by the author in the

United Kingdom, March 2021. As discussed above, only “large”transactions need to be reported to the

central bank.

58. I asked the exchanger why he did not simply say he had zero large transactions, to which he

responded that inspectors would know he was lying, leading them to become suspicious of his transactions.

59. Mir Jahan (DAB ofﬁcial), interview by the author in Kabul, Afghanistan, November 2017.

22 LAW & SOCIAL INQUIRY

to thirty shops in one day and, thus, the full inspection of the bazaar takes close to two

weeks. This is a long time for exchangers to keep their books hidden, and the random

movement of inspectors between shops may catch some off-guard. The inspection team

inevitably ﬁnds some breaches. Sometimes a license has lapsed, and other times an

exchanger has not recorded or reported his transactions properly, and the inspection

team may issue a warning or a ﬁne to the offending party. The team also works with

exchangers by providing advice on how to best maintain their records, revealing how

their relationship with exchangers is not purely adversarial but also complementary. By

the end of their inspection, the team can claim to have duly discharged its responsibility

of monitoring the bazaar, while exchangers can likewise claim to have avoided the undo

intrusion of the central bank. This game of outmaneuvering the other allows for both

the exchangers and the inspectors to maintain their respective claims to authority at the

borderlines where their respective legal systems come into contact with one another and

the dominant authority of neither can be taken for granted.

The regulation of exchangers through central bank licenses brings into plain sight

the role that is played by the state in constituting the boundaries of the bazaar. Studies

in fragile settings tend to treat markets as “islands of order”that operate “in the absence

of a bureaucratic state that provides such order”(Spector 2017, 2). The autonomous

functioning of these communities is attributed to the absence of the state (Greif

1993; Richman 2017). Furthermore, existing studies posit that private communities risk

collapsing once their boundaries come under pressure, whether from the growing pres-

ence of the state (Clay 1997; McMillan and Woodruff 2000) or the unregulated entry of

newcomers (Woodruff 1998; Grisel 2021). By contrast, the licensing of money exchang-

ers by the central bank allows exchangers to retain control over community member-

ship. Eleanor Ostrom (1990) argues that states may assist legal ordering in private

communities by assuming the costs of monitoring shared resources. The bazaar compli-

cates this assertion by showing that the relationship between the state and a private

community can be simultaneously collaborative and antagonistic. The monitoring of

exchangers by the central bank infringes on their autonomy, even while exchangers

depend on this same governmental body for licenses. For exchangers, the price of con-

trolling the boundaries of their community is periodic interference by government ofﬁ-

cials in their affairs.

FORMALIZATION OF THE CONFLICT COMMISSION

Structure of the Commission

Prior to the emergence of the Union, no formalized process existed for the resolu-

tion of disputes. Parties sought to resolve problems informally through direct negotia-

tions, sometimes calling upon respected friends and elders to intervene. The process had

no regularity and thus would change between cases and individuals. Exchangers did

recognize that courts were available as a potential venue to have a dispute resolved,

but the prevailing attitude was that, if one were to go to court, “the solution is never

Order in the Bazaar 23

solved”and the parties would be in “for a looooong ride.”60 As the number of exchang-

ers in the bazaar grew and the volume and frequency of transactions increased, the com-

munity came under increasing pressure to ﬁnd an expeditious means of resolving

disputes between parties.

The emergence of the Conﬂict Commission, one of ﬁve standing commissions

established by the Statute, introduced a level of regularity in the resolution of disputes.

Prior methods of resolving conﬂicts relationally continue to be widely practiced. Parties

still settle disputes between themselves or with the assistance of a respected friend. The

addition of the Commission allows for parties to escalate their disputes internally within

the bazaar by seeking the intervention of the Union, which is itself composed of

exchangers. As a formalized dispute resolution mechanism, the Commission has altered

the process through which disputes are resolved while also providing “considerable con-

tinuity in social values and concerns”(McConnachie 2014, 58).

The Conﬂict Commission consists of ﬁfteen members along with one chair and

two deputies.61 To reduce its load, the ﬁfteen members are divided into three commit-

tees, each with ﬁve members, and each carrying out the same task of resolving cases.

The stated duty of the Commission is to “ﬁnd the solution to a legal conﬂict”based on

the guidance of the “Chairman of the Commission, the regulations and customs of jirgas,

and trade practices.”62 Beyond these vague instructions, the Statute does not specify the

process of submitting complaints or any of the rules that should be applied in adjudi-

cating cases. The Statute deﬁnes the general, administrative contours of the

Commission without specifying the applicable procedural and substantive rules. The

Commission could be considered as an “administrative bureaucracy,”a term used by

Kwai Hang Ng and Xin He (2017, 18; emphasis in original) to describe the structure

of certain Chinese courts where “rules are only applied as to who should be in charge of

making decisions ::: rules decide who makes the decision, but not so much how the

decision should be made or what the decision should be.”As an administrative bureau-

cracy, the Commission provides a shell that is authorized by the Statute and backed by

the legitimacy of the Union; however, its substantive contents must be supplied by its

members who adjudicate the cases of other community members.

The lack of instruction seems intentional for two reasons. The ﬁrst reason relates to

the concerns raised by exchangers during the drafting of the Statute on the possible

undue interference of the Union in their transactions. While a dispute resolution forum

would hopefully facilitate business in the bazaar, its existence could be seen as infringing

on the activities of some exchangers by creating normative expectations that did not

exist previously. By minimizing the rules related to the Commission, drafters avoided

potentially controversial and politically charged discussions that may have made it dif-

ﬁcult to garner the agreement of all exchangers. Thus, instead of delineating speciﬁc

rules, the Statute leaves it to the exchangers to decide on the precise procedural mech-

anisms for receiving, hearing, and disposing of disputes as well as the appropriate sub-

stantive rules to be applied. Elsewhere, an intentionally vague approach to legislating

60. Wahab (money exchanger), interview by the author in Dubai, United Arab Emirates, October

2017.

61. Statute, Art. 26.

62. Statute, Art. 27.

24 LAW & SOCIAL INQUIRY

has been deployed as a strategy to avoid contentious issues. Hanna Lerner’s(2011) work

on constitution-making in divided societies contends that drafters in such settings may

intentionally leave certain provisions of law vague or incomplete to avoid politically

charged and divisive issues. In East Timor, where dispute resolution authority rests with

local community leaders, the government sought to assert its authority by establishing a

process of electing those leaders, though allowing them to resolve issues according to

their own rules (Swenson 2018). The bazaar’s Statute similarly provides broad outlines

of a dispute resolution mechanism but defers any choices on procedural and substantive

rules to the exchangers themselves.

An alternative, more pragmatic reason may explain the vague rules associated with

the Conﬂict Commission. Textual resources do not command signiﬁcant authority

amongst exchangers, reﬂecting their backgrounds and day-to-day dealings. Few

exchangers have been formally educated, and many possess limited literacy. When

asked about his educational background, one exchanger laughed out: “Of course, I

didn’t go to university—this [that is, the bazaar] has been my university.”63 One learns

the trade of money exchanging by spending extended periods with a more senior

exchanger (often one’s father or uncle), acquiring not only their knowledge but also

their social capital—their network of customers and their reputation as a trustworthy

person. While transactions are meticulously noted in accounting books and, increas-

ingly, in computer excel ﬁles, few transactions involve written contracts or receipts

since greater reliance is placed on social relations.64 Given the general preference

for practice over text, a lengthy set of rules would be viewed as not only unnecessary

but also undesirable and impractical. The vague provisions in the Statute on the rules of

the Conﬂict Commission strike a balance between ensuring that exchangers retain con-

trol over internal affairs in the bazaar vis-à-vis the state and granting exchangers full

ﬂexibility to conduct the Commission as they deem appropriate.

Bringing a Dispute before the Commission

Disputes are heard in the main ofﬁce of the Union on the top ﬂoor of the bazaar.

This ofﬁce possesses an unremarkable appearance with sofas along the walls and coffee

tables spread out across the middle. Connected to the main ofﬁce area is a smaller room

with traditional seating mattresses (toshak) on the ﬂoor. Most disputes are heard in this

adjacent room, with the committee members sitting in a circle alongside one of the

disputant parties on the ﬂoor.65 The physical forum bears no resemblance to a court-

room but appears instead like a familiar domestic setting. While no statistics exist on the

63. Naeem (money exchanger), interview by the author in Kabul, Afghanistan, December 2017. None

of the exchangers owning shops who I spoke to had university degrees. Some shop employees, usually in

their early to mid-twenties, had degrees.

64. The issue of trust between exchangers and clients is explored in a forthcoming article of mine. See

Choudhury, forthcoming.

65. Often, the committee hears from the parties one by one, so that the parties are not aggravated by

each other’s presence.

Order in the Bazaar 25

volume of disputes processed by the Commission, it is the most active subcommittee of

the Union, with several disputes being resolved each week.66

The functioning of the Commission depends on the willful participation of the

parties. The primary beneﬁciaries of the Commission are exchangers facing problems

with one another. The Commission has neither the power to compel parties to attend

nor the ability to enforce its judgments. Parties must do this work themselves. As a small

and close-knit community, exchangers understand that they will likely need to rely on

others in the bazaar in the future. Negative rumors about a party unwilling to comply

with a decision of the Commission may make others reluctant to deal with that

exchanger. The threat of reputational damage and social ostracism is thus strong enough

to ensure that parties participate in hearings and adhere to judgments. Furthermore,

while an exchanger may be unhappy by the decision of the Commission, the prospects

of a lengthy and costly legal dispute may be even more unappealing, and, thus, exchang-

ers are often willing to swallow the costs and move forward. Discussions with numerous

exchangers revealed the general procedure of raising a dispute:67

Step 1. Submitting a formal application by the claimant to the ofﬁce of the Union, clearly stat-

ing personal identity, nature of the claim, and the opposite party.

Step 2. Reviewing the claim by the Union and sending it to the Conﬂict Commission if the

claim is legal and logical.

Step 3. Assigning the case to one of the three committees by the chair of the Commission.

Step 4. Taking ﬁngerprints and signatures of both the plaintiff and the defendant in order to

ensure their compliance with the ﬁnal ruling of the Commission.

Step 5. Reviewing and investigating the case through discussions, oral testimony, supporting

documents, or whatever other resources that may be necessary for making the ﬁnal decision.

Step 6. Sending the decision of the Commission to the Union for signature by the president to

make the decision ﬁnal and binding.

These steps provide a general sense of the process involved, which has emerged as a

commonly followed routine in dealing with disputes in the bazaar. Its regularity gives

the process an air of authority by providing parties reasonable expectations of the steps

involved. Nonetheless, this process is by no means applied uncompromisingly as its

actual instantiations will deviate according to circumstances.

Cases before the Commission

The ﬂexible application of procedural as well as substantive rules is best revealed by

examining some of the disputes that come before the Commission. Three such cases are

described here to provide a glimpse of dispute resolution in action.

66. This assessment is based on my own observations of the ofﬁce of the Union. When I asked for

estimates, several exchangers said ﬁfteen to twenty disputes arise each day. However, this ﬁgure seemed

to be a signiﬁcant overestimate given my observation of the Union and also likely involved minor disagree-

ments between exchangers, most of which never reached the Union.

67. These steps represent a general, recognizable template of procedures constructed by asking expe-

rienced exchangers to reﬂect on the process after the fact.

26 LAW & SOCIAL INQUIRY

Case 1

An exchanger, Matin, urgently needed $1,000 for a transaction with a client but

lacked the necessary capital, and so he borrowed this amount from Saifullah, another

exchanger, agreeing to return the amount in one day. However, after three days, Matin

had still not returned the amount. Saifullah thus referred the case to the Union, and the

president talked with both Matin and Saifullah. Upon conﬁrming that the amount was

outstanding, the president scolded Matin and orally ordered that he return the amount

immediately. The case was not referred to the Conﬂict Commission. After one day,

Matin returned the full amount. Saifullah stopped loaning money to Matin for several

months, but eventually resumed doing so.

Case 1 reveals that disputes may be resolved at any point and need not proceed to

the Conﬂict Commission. The procedures are only followed insofar as they contribute

to the resolution of the dispute. A deviation presents no issue if it can help expedite a

resolution of the conﬂict. In this case, the president of the Union was immediately able

to dispose of the case without involving the Commission. Though the parties did not

resort to the Commission, by turning to the Union, the parties signaled an escalation in

the intensity of the dispute. In receiving cases and inquiring about problems, the presi-

dent not only diffuses conﬂicts but also reafﬁrms the Union’s authority to carry out this

role. The ability to question the parties “reasserts its jurisdiction, reinforces the atmo-

sphere of ofﬁciality, and claims to represent the concerns of the community about the

eventual consequence of the relationship”(de Sousa Santos 1977, 46). By turning to

the Union, exchangers are conﬁrming their commitment to the Union and its authority

to resolve disputes. The more that exchangers turn to it when disputes arise, the more

the Union gains “cognitive legitimacy”—that is, it is viewed as the natural and obvious

forum for dealing with such disputes (Suchman 1995, 577). Throughout the bazaar,

when asked how problems were resolved, exchangers consistently responded that the

Union resolves their disputes, suggesting its widespread approval.

Case 2

An exchanger, Omid, was the owner of a house and allowed his friend, Ali, to live

in it. Because of their close friendship, Omid did not take rent from him, and this

arrangement continued for ten years. Omid previously worked as a property dealer,

which is how he acquired several houses through shara’i (customary) property deeds.

After ten years, Omid asked Ali to vacate the house as he needed to sell the house

to repay a loan. However, at that point, Ali claimed that he had purchased the house

and that he was the rightful owner. Omid thus brought the matter to the Union. The

Commission held a jirga to hear the case in the presence of both the exchanger and the

tenant; however, during this session, Omid felt that the chair was being biased in favor

of Ali because of an alleged pre-existing relationship. Omid thus left the jirga without

the case being resolved and approached another respected exchanger, Jawad, who was

also working in the bazaar. He explained his case to Jawad, stating that he owned the

customary deeds to the house. The jirga reconvened its session, and this time Jawad also

participated. After hearing all of the parties, including Jawad, the Commission ruled

Order in the Bazaar 27

that Ali should vacate the property as soon as possible. The decision was written and

signed by the president of the Union.

The jurisdiction of the Commission is porous and ﬂexible, being open to parties

who believe they can beneﬁt from its services. While disputants are primarily exchang-

ers, they may also involve non-exchangers and may concern a matter not directly

related to the bazaar. In Case 2, the Commission was willing to hear the case as it dealt

with a problem of one of its exchangers, and it felt that it had the ability to resolve the

matter. By expanding its jurisdiction, the Commission reinforced its ability to resolve

disputes, thereby legitimizing its authority both in the bazaar and across society, while

the parties beneﬁted from an expeditious process supported by respected members of

society. Though a dispute may not deal directly with a transaction in the bazaar, it nor-

mally has some level of connection with the bazaar since otherwise the parties would

not feel bound by its decision. A non-exchanger cannot be compelled to attend through

the threat of reputational damage and thus must agree to participate in the process. Ali

was not available to explain why he participated in the process despite not being a

money exchanger himself; hence, one can only speculate on the reasons. According

to Jawad, Ali knew members of the committee and thus may have hoped to have

the decision go in his favor for this reason. Alternatively, Ali may have hoped to

do business with an exchanger in the future and thus did not want his reputation

affected. However, mostly likely, he participated because, while there existed the pos-

sibility of a decision in his favor, a decision against him would not be decisive. The

Commission could not compel him to vacate. Omid would still have to approach

the community elders in his area with the decision and seek their assistance in evicting

Ali. Otherwise, Omid could try to work out a compromise with Ali or take the matter to

court (using the written decision as persuasive evidence). In any case, Ali still retained

leeway in being able to negotiate an outcome in his favor, even if partially. When I

asked Jawad who got the house in the end, Jawad shrugged his shoulders, saying:

“We decided against Ali so he should leave. The Commission did its job.”68 The

Commission has done all it could do—namely, render a decision.

Like Case 1, Case 2 highlights the ﬂexible procedures that are applied by the

Commission. No clear procedural rules exist on the participation of outside third parties

when disposing of a case. The testimony of a third party may be welcomed if it can bring

about greater clarity or a resolution to the dispute. In this regard, rules should be viewed

as “a loosely constructed repertoire rather than an internally consistent code”since they

may be manipulated and selectively applied with the goal of arriving at a ﬁnal outcome

(Comaroff and Roberts 1981, 18).

Case 3

A client walked into Hikmatullah’s shop asking him to safekeep $6,450. The client

was planning to get smuggled to Europe and only wanted the money released to the

smuggler upon his arrival. Hikmatullah accepted the funds, and his shop clerk drew

up a contract stating: “I take $6,450 from [client] for ﬁfteen days. During the ﬁfteen

68. Jawad (money exchanger), interview by the author in Kabul, Afghanistan, December 2019.

28 LAW & SOCIAL INQUIRY

days, if [client] gives me permission, I will give the money to [smuggler]. If no permission

is given, then after the ﬁfteen days, I will return the money to [client].”After twelve

days, the smuggler came to the ofﬁce and asked for the money, saying that he completed

his job. The shop released the funds to the smuggler. However, after ﬁfteen days, the

client returned to the shop to reclaim his funds claiming that the smuggler failed to

fulﬁll his role. The case was referred to the Commission. A group of seven committee

members—themselves exchangers—investigated the matter, hearing the parties in turn.

The exchanger claimed that the client was colluding with the smuggler and thus engag-

ing in fraudulent activities, whereas the client argued that the exchanger had not fol-

lowed the terms of the agreement. The Commission ruled that the shop should return

the full amount ($6,450) back to the client. The client threatened to go to court if the

shop did not return the full sum. The shop returned the full sum to the client.

Hikmatullah remarked that if the customer were to lodge a court case against him,

it would greatly damage his reputation, which was far worse than a payout of $6,450.

One of the reasons that decisions of the Union are followed is the reputational

damage that a recalcitrant party may suffer. In Case 3, the client as a non-exchanger

expressed his willingness (even if disingenuous) to engage in court proceedings. In this

regard, the client was able to engage in strategic forum shopping, choosing the option

most likely to provide the desired outcome (von Benda-Beckmann 1981). The client

was able to utilize the Commission to attain a positive outcome quickly and cheaply.

Reputational damage would only be incurred by the exchanger, and, thus, he may ﬁnd

himself in a particularly precarious situation when faced with a customer willing to

exploit this imbalance. As long as a dispute is resolved by the Commission, an

exchanger will generally suffer minimal reputational damage as the outcome of disputes

are not actively broadcast or particularly sought out in the market.69 As one exchanger

remarked: “The Commission hears so many disputes. We don’t have time to learn about

all of them. We’re too busy.”70 Conversely, if an exchanger refused to adhere to a deci-

sion of the Commission, he would risk reputational damage since the news of his recal-

citrance would spread more quickly across the bazaar as it represents a deviation from

the expected behavior of an exchanger. Furthermore, if a dispute escalates to legal pro-

ceedings, this news will likely spread because of the low frequency of such incidents,

further damaging the exchanger’s reputation.

Case 3 also highlights the blurred line between licit and illicit transactions in the

eyes of the Commission. Parties would generally be hesitant about pursuing a case in the

state courts where the underlying transaction involved human smuggling (calling to

question the veracity of the claimant’s threats in Case 3 to go to court) since both par-

ties risk being punished.71 The Commission has greater ﬂexibility to deal with such mat-

ters. By focusing on the wording of the contract, the Commission can maintain a

convenient separation between the contract and the underlying transaction, even if

all parties, including the members of the Commission, are aware of the true nature

of the transaction. Nonetheless, the degree of illicitness of the underlying transaction

69. While a decision may not be openly broadcast, information on the outcome may still spread across

the bazaar since no rule exists on keeping decisions private.

70. Haﬁz (money exchanger), interview by the author in Kabul, Afghanistan, April 2018.

71. Law Prohibiting Human Trafﬁcking and Migrant Smuggling, Law no. 1395/11/10 (2017)

(Afghanistan)

Order in the Bazaar 29

is also a factor. While the Commission may be willing to hear an agreement where

smuggling is involved, it will not hear disputes involving illicit drug money. Parties

would also be unlikely to bring such disputes before the Commission since a party

caught dealing with such funds would likely be arrested by the police and have their

shop closed.72 Limits thus exist on the extent to which the Commission can operate

without the involvement of the state authorities.

The principal success of the Commission can be attributed to its ability to expe-

ditiously resolve disputes. In many settings, private associations provide a quick and

cheap alternative to courts (Bernstein 1992,2001; Richman 2006). With exchangers,

the timing of transactions is an integral element of their business. The ﬂuctuations in

currency prices each minute can provide an opportunity for an exchanger to reap a size-

able proﬁt. Exchangers thus need disputes resolved swiftly so that they can recuperate

outstanding funds (like in Case 1) and move forward. Moreover, exchangers depend not

only on their own funds but also on strong working relations with one another in the

bazaar since collaboration creates proﬁtable opportunities. The Commission helps neu-

tralize disputes while maintaining the reputation of the parties, thus allowing disputants

to continue working with one another (if not immediately, then possibly after the pas-

sage of time once emotions have settled and trust is regained).

Furthermore, exchangers view the Commission as something that is “theirs.”Its

adjudicating members are themselves exchangers, all aware of the importance of quickly

resolving disputes rather than becoming bogged down in cumbersome rules and formal-

ities. The Commission allows for disputes to remain within the internal control of the

Union. Parties unhappy with an outcome can directly talk to the exchangers involved

in adjudicating the case (no rules or expectations prevent such behavior). In Case 3,

following the decision by the Commission to hold the exchanger liable for the full

amount, a (university-educated) employee of the exchanger’s shop named Hamid con-

fronted the president of the Union to express his frustration about a process that vin-

dicated the fraudulent—as he saw it—activities of customers. His ability to vocalize his

opinion and be a part of the ongoing life of the Union helped neutralize some of the

damage he felt as part of the losing party. While unhappy about the outcome, Hamid

was aware of the entire process that played out from start to ﬁnish and could have

become active in the life of the Union in the future if he wanted to seek changes.

He thus retained a level of agency over his circumstances despite his losing position,

which can be contrasted with the opaqueness and unpredictability of state legal pro-

ceedings (Swenson 2017). Furthermore, the Commission constitutes one of the integral

functions of the Union, which protects the collective interests of all exchangers—

including the aggrieved ones—against the state. Thus, the proverb, “me against my

brother, me and my brother against our cousin, the three of us against the world”con-

veys the attitude that exchangers hold towards the Commission (Thompson 2011).

The ﬂexible application of procedural and substantive rules shows how the

Conﬂict Commission does not represent a break from past practices but, rather, signiﬁ-

cantly draws from those practices. The members of the Commission are not legally

trained persons but, instead, money exchangers who are all peers of the impugned

72. Law on Prevention of Money Laundering and Proceeds of Crimes, Law no. 05/01/1393 (2014)

(Afghanistan)

30 LAW & SOCIAL INQUIRY

parties. The members sit in a circle on the ground or on chairs when listening to dis-

putants. They communally discuss the matter amongst themselves and with the parties

and may be swayed by the testimonies of witnesses or respected persons. Amongst the

many disputes that come before the Commission, only one principle remains constant

—ﬁnding a solution to the underlying dispute. As John Comaroff and Simon Roberts

(1981, 14) write, “rules may themselves be the object of negotiation and may sometimes

be a resource to be managed advantageously.”Rules serve as tools that may aid in reach-

ing that solution or may be put aside if deemed an impediment.

In this way, the Commission, while being cast outwardly as a formalized adjudica-

tive body of the Union, functionally resembles traditional shuras and jirgas found

throughout Afghan society. Like a shura or jirga, it works toward reaching a solution

that helps maintain stability within the community. However, this approach does not

imply that cases will always involve a compromise by both sides (in all three cases

above, one winning party reaped the full beneﬁt). Because the adjudicating members

are all exchangers and understand the role of money in the affairs of individual

exchangers, they are reluctant to lessen the obligation of debtors, as this would interfere

with the very business of money exchanging. Rather, keeping the peace often means

affording parties their full right, as otherwise the Commission would signal to partici-

pants in the bazaar than any party could obtain a reduction in its obligation by raising a

complaint.

The Commission helps reveal how legal transformations within a private commu-

nity may gain legitimacy amongst its members. Both the formalization of rules in the

bazaar and the demarcation of its boundaries through central bank licenses may be nec-

essary conditions for preserving the autonomy of the bazaar. However, meeting the suf-

ﬁciency condition requires that the transformations of the bazaar’s legal system be

legitimized by its members. One reason a community may collapse is because its social

norms, which provide stability, may also be a source of inertia if they fail to keep pace

with changing societal circumstances (Clay 1997; Richman 2017; Grisel 2021). The

few studies that shine a light on the conditions under which private communities will

emerge do not provide an explanation of the process of norm legitimation within a pri-

vate community (Grossman 2021).

Mark Suchman’s(1995) typology of institutional legitimacy is instructive in this

regard. The workings of the Commission show that its substantive rules rely on the

long-standing norms of exchangers and thus are consistent with their mores and con-

ventions, which may be referred to as “normative legitimacy.”Furthermore, newly for-

malized rules on the administrative running of the Commission provide exchangers

with tangible beneﬁts, which may be termed “pragmatic legitimacy”—namely, a forum

that efﬁciently resolves disputes without government interference and that allows

exchangers to be a part of the process at every stage, thereby granting them agency.

Because of its widespread support amongst exchangers, the Commission is viewed as

the natural and obvious forum for dispute resolution if a problem in the bazaar requires

the intervention of third-party arbitrators—it has “cognitive legitimacy.”The

Commission reveals how legal transformations may be legitimized through a combina-

tion of continuity and change—reliance on the widespread support of prior norms

alongside the introduction of new rules that provide discernable gains.

Order in the Bazaar 31

COURTS AS A FINAL RESORT

While the Commission is available to parties seeking to resolve their disputes, state

courts remain available to any aggrieved party (Rahimi 2019). The Union does not

deny the jurisdiction of courts nor its ability to deal with disputes. Rather, the

Commission is viewed as a more practical, expeditious way of resolving disputes and

allows for the parties to beneﬁt from adjudicators who themselves are area experts

and who understand the signiﬁcance of having a dispute quickly resolved. One instance

where an exchanger may seek the assistance of the court is when an exchanger in the

bazaar closes his business—the classical “end-game”problem in game theoretic terms

(Landa 1981). The Commission is effective because the parties are repeat players—that

is, parties who repeatedly interact with one another and who wish to avoid the sanc-

tions of reputational damage and social ostracism. However, when an exchanger discon-

tinues his business and leaves the bazaar, he no longer has an incentive to submit

himself to the jurisdiction of the Commission or adhere to its outcome. In such instan-

ces, the court may be the only available forum for an exchanger. Stewart Macaulay’s

(1963) study of Wisconsin businesses showed that, while parties may shun the use

of courts and instead prefer to resolve disputes relationally, when the relationship

between the parties is at an end, the wronged party is more likely to threaten legal pro-

ceeding through the courts.

As an exchanger named Siyar explained, “most of the time disputes between

exchangers are resolved through the Union. If disputes between them are not solved

through the Union, then they will go to court.”73 He continued by describing a dispute

that arose between two exchangers. One of them had invested $500,000 in the other.

One day, the exchanger holding these funds came under government scrutiny for

alleged illegal activities, which for undisclosed reasons made him unable to return

the funds. Subsequently, this exchanger closed his shop in the bazaar. Since he no lon-

ger operated in the market, he had no incentive to appear before the Commission.

Thus, the ﬁrst exchanger commenced legal proceedings to reclaim his funds. The court

maintains jurisdiction to hear cases involving exchangers, and exchangers may pursue

this option once the forms of coercion available through the bazaar legal system cease to

be effective. Even in those instances where the Union is unable to resolve the dispute, it

may intervene to provide relief to the aggrieved parties in other ways: “The Union

allowed him to take the shop [of the exchanger who did not return the funds]. So

he took the shop instead of his money. If the second exchanger ﬁnds the money

and convinces the ﬁrst exchanger to take back the money, he may get his shop back.”74

As this instance shows, while exchangers may turn to courts because of the inabil-

ity of the Commission to resolve a dispute, the Union will not necessarily absolve itself

of all responsibility. The Union can propose an array of creative options that may

resolve a problem or provide an interim solution. The jurisdiction of the Union and

the court are thus not mutually exclusive but, rather, may overlap, allowing for

73. Siyar (money exchanger in Kabul, Afghanistan), phone interview by the author in the United

Kingdom, June 2020.

74. Wasim (money exchanger in Kabul, Afghanistan), phone interview by the author in the United

Kingdom, November 2020.

32 LAW & SOCIAL INQUIRY

aggrieved parties to engage in strategic forum shopping if any one forum is unable to

provide an adequate outcome (von Benda-Beckmann 1981; Tamanaha 2008;

McConnachie 2014).

CONCLUSION: WHY DID FORMALIZATION SUCCEED?

While a variety of studies detail the functioning of non-state legal systems, usually

explaining their existence through the efﬁciency savings gained by the parties, they

often provide static accounts of how such systems operate (Landa 1981; Ellickson

1991; Bernstein 1992; Greif 1993; West 1997; Ranasinghe 2014). In the cases where

a dynamic element is included to track the functioning of the non-state legal system

over time, the result is normally either the deterioration of the system (Greif 2006;

Richman 2017; Grisel 2021) or its integration into the state legal system (Feldman

2006). The money bazaar reveals the ability of an informal, non-state legal system

to maintain its operational autonomy during a period of state encroachment by mim-

icking the state legal system and formalizing its own operating structure. The commu-

nity of exchangers has transformed from operating under an informal structure to

hosting a centralized administrative body, including its own dispute resolution mecha-

nism. The notion of formalization here does not refer to the integration of non-state law

into the state legal system, as Hernando De Soto (1989) recommended in his study of

the Peruvian informal economy, but, rather, the regularization rules and social struc-

tures. The formation of the Union and Conﬂict Commission represents the regulariza-

tion of the bazaar legal system rather than its integration into the workings of the state

legal system.

The question remains as to why the bazaar has been so successful in transforming

into a formalized, non-state legal system. Five factors help explain this success. First, the

process of transformation was entirely internally driven. No outside body, whether the

state or otherwise, initiated the efforts to develop a codiﬁed Statute and centralized,

administrative unit within the bazaar. These efforts were championed by the exchangers

themselves as they sought to protect their market from the external and internal pres-

sures that threatened to undermine it. The initiation of these efforts by the exchangers

themselves helped overcome some of the suspicion of introducing change, as many

exchangers would otherwise be wary about changes in the bazaar that may affect their

activities. Exchangers were involved in the process of developing the Statute from start

to ﬁnish, and all members of the bazaar, including those not leading these efforts, had

the opportunity to participate in its development. The relatively small size of the bazaar

with approximately four hundred shops meant that each shop was able to directly inter-

act with the administration, even challenging certain aspects of its operations, if the

need arose.

This internal process of transformation was also inﬂuenced by informal hierarchies

that exist amongst exchangers (Sagy 2011). Those spearheading the efforts to develop

the Statute were experienced exchangers who had been operating for decades in the

bazaar, even during the reign of the Taliban regime (and some even prior to that).

While the bazaar consisted of a mix of both long-standing and new exchangers, the

former were particularly attune to the changes taking place within society and their

Order in the Bazaar 33

possible consequences for the entire market in the foreseeable future. Furthermore,

these experienced exchangers wielded signiﬁcant respect, as their years in the market

evidenced their ability to weather market contingencies, and, thus, their calls to form a

centralized administrative body to protect the autonomy of the bazaar played a crucial

role in garnering widespread support for the Statute.

Second, exchangers generally understood that a centralized body would be capable

of protecting their interests. As the entire enterprise of money exchanging depends on

the public viewing exchangers as trustworthy, a centralized body could help prevent

deceptive exchangers from using the reputation of other exchangers to deceive custom-

ers, thereby damaging the image of the bazaar. Furthermore, money exchanging can be

considered a privileged trade since those in the profession usually possess signiﬁcant

wealth and a rich set of social ties. Unimpeded access into the profession could affect

the prestige of the incumbent exchangers. A union allowed the exchangers to maintain

their privileged position by vesting them with control over membership into their com-

munity. Finally, a union could protect against outside interference by the state, thus

allowing exchangers to conduct themselves on their own terms.

Third, formalization helped deﬁne the boundary between the bazaar and the state,

allowing for the bazaar to operate more effectively within its boundaries as well as along-

side government institutions. The Statute breathed life into the Union and provided it

with the authority and jurisdiction to deal with matters internal to the bazaar, including

dispute resolution. The revision and subsequent conﬁrmation of the Statute by govern-

ment ofﬁcials further afﬁrmed the jurisdiction of the Union, while also impliedly placing

a limit on the government’s jurisdiction on those matters. The state in turn beneﬁted

from the greater authority of its own presence in the market since the successful func-

tioning of the Union depended on the licensing of exchangers by the central bank.

Thus, deﬁning the boundary between the bazaar and state not only neutralized tensions

between the two but also made cooperation more feasible. However, this boundary is

also characterized by ambiguity, such as the extent to which central bank inspectors

may monitor the activities of exchangers. Maintaining this zone of ambiguity allows

for each to claim its dominant authority without the need to decisively resolve the mat-

ter in favor of one or the other.

Fourth, the presence of the Statute and the Union reinforces a sense of community

amongst a close-knit group of actors. Exchangers viewed the Statute as “their”law and

overwhelmingly held the Union in positive esteem, as it operated “solely for the beneﬁt

of exchangers.”75 The Union organizes events that reinforce social ties between

exchangers, such as the celebration of religious events in the bazaar, blood drives for

the public, and communal prayers when a prominent member of the bazaar or society

has passed away. As Tom Tyler (2006, 173) writes, “people value identiﬁcation with

social groups”as they “provide a source of resources, self-knowledge, self-identiﬁcation,

and social reward,”allowing members to “develop shared norms and patterns or reci-

procity.”A sense of community amongst exchangers promotes shared conventions,

thereby strengthening cooperation in the course of business.

Fifth, formalization does not represent a rupture from the past but, rather, the

transformation of past norms and practices into new forms. Part of the success of

75. Edris (money exchanger), interview by the author in Kabul, Afghanistan, January 2018.

34 LAW & SOCIAL INQUIRY

the Conﬂict Commission rests in its ability to integrate existing norms and practices

into a new adjudicative body. Though it represents a formalized institutional body

within the bazaar, the Commission relies on the informal practices that have long per-

meated the bazaar, including social networks that regulate the behavior of exchangers

through the dual threats of reputational damage and social ostracism (Aviram 2003). As

Roderick Macdonald (2013, 316) writes, these “informal, unwritten rules are signiﬁcant

not just because they are evidence of the ‘law in action’but also because they are resour-

ces from which explicit, written rules typically draw their power and content.”Informal

norms infuse meanings into everyday actions in the bazaar and take solid form when

appropriated by the Commission. While the Statute may breathe life into the formal

structure of the Commission, this structure gains currency from the informal normative

practices of the bazaar. The ability of the Commission to operate like a shura or jirga

facilitates the continuance of uncodiﬁed, social practices that beneﬁt from widespread

approval amongst exchangers.

Nonetheless, the precarious life of the bazaar is played out everyday, as tensions

come from many directions. An ever-changing state is always liable to introduce

new regulations that may undermine the ability of exchangers to cooperate.

Alternately, an excess of deceptive behavior amongst exchangers beyond a certain

threshold could also risk collapsing the bazaar due to a loss of trust. Criminality remains

yet another problem in recent years, as exchangers and their families have increasingly

become the target of criminal gangs (Nordland and Abed 2019). Will these tensions

bring about the eventual demise of the bazaar? While its future remains uncertain,

its recent past reveals its ability to transform by creatively appropriating and re-institu-

tionalizing legal practices from the state to consolidate its own functions. Its ability to

innovate is thus fundamental to the way it operates. This transformative capacity will

play an increasingly important role in the coming decades as the bazaar adapts to new

changes from not only a changing state but also changing economic conditions at the

local, regional, and transnational levels. By tracking the transformations of the legal

system of Kabul’s central money bazaar over the past two decades, this article has dem-

onstrated that even in a fragile setting like Afghanistan, where the state lacks many of

its functionalities, a private community may be able to maintain an autonomous legal

system not by opting out of the state but, rather, by relying on it.

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Our Fascination, the Law: On Similarities, Differences, and the Future of Law and Society Scholarship: Asian Law and Society Association 2023 Presidential Address

Article

Full-text available

Mar 2025

Lynette J. Chua

This inaugural presidential address of the Asian Law and Society Association features three recently published monographs to draw attention to research by the next generation of scholars and to show how they contribute to the field. Although the three books differ in terms of focus, methods, and findings, they share a hallmark of law and society, that is, they investigate practices, beliefs, and objects that are often taken for granted. At the same time, the three studies arrive at dissimilar conclusions about law, which reflects another unifying hallmark of law and society—its diversity. Together, the inconsistent findings expose the many profiles of law and demonstrate its fascinating nature. They remind us that we do not yet know the intricacies of law, and we need all kinds of law and society scholarships—on Asian societies and elsewhere—to continue advancing the field.

A Call to Arms: Proposing the Use of Social Science Methods in Transnational Competition Law

Article

Apr 2024
Univ New S Wales Law J

Competition law enforcement is one of the cornerstones of sound business regulation; yet it faces a problem in the transnational context. Whereas transnational commerce seamlessly transcends borders, competition law has jurisdictional roots, lacking a true transnational response. Global frictions due to the enforcement of divergent domestic laws and policies seem inevitable yet are surprisingly rare. We argue this phenomenon cannot be fully explained by a doctrinal analysis of the global efforts towards policy or legal convergence. Instead, the focus should be on the competition law officials who operationalise the law in a transnational context. This ‘human element’ of the inquiry must embrace qualitative research methods, such as ethnographic studies commonly used in legal anthropology, to develop a comprehensive legal analysis in this context.

Faithful Finance: Unlocking Banking Islamization in Afghanistan

Article

Full-text available

Jul 2023

This paper explores the challenges and prospects associated with the adoption of Islamic banking in Afghanistan. Despite the global growth and acceptance of Islamic banking by approximately 50 countries by 1997, Afghanistan only embraced it between 2008–2009. The decision to convert conventional banks to Islamic ones, driven by the involvement of interest rates (riba) in the prevailing system, necessitates a thorough examination of the challenges and the need for an appropriate response. The study employs qualitative, analytical, and exploratory methods, reviewing secondary sources and conducting unstructured interviews with key stakeholders, including officials from the Da Afghanistan Bank (DAB), staff of Islamic banking institutions, experts in Islamic banking and finance, and consumers. The findings reveal that the challenges in promoting Islamic banking in Afghanistan are more complex and multi-layered than commonly understood, stemming from the legal system, regulatory capacities and mindset, banking services, and public perception. The paper emphasizes the importance of addressing these challenges comprehensively to safeguard the already fragile economic and financial sector. Failure to do so may lead to further deterioration. This research contributes to the existing body of knowledge by shedding light on the unique challenges and prospects of Islamic banking in Afghanistan, providing valuable insights for policymakers, regulators, and practitioners in shaping an effective transformation strategy.

'Constellations' and 'Entanglement' in the Study of Legal Pluralism: Reflections on the Scholarship of Keebet Von Benda- Pluralism

Article

Full-text available

Sep 2024

Petra Mahy

Two key terms permeate the work of Keebet von Benda-Beckmann (and of her co-authors, especially Franz von Benda-Beckmann) in her discussions of legal pluralism: 'constellations' and 'entanglement'. These terms are both concerned with describing the existence of, and interrelationships between, plural legal orders. This article critically analyses these two terms, their usage and implied meanings, and compares them with other alternative concepts employed elsewhere in legal pluralism and cognate literature. With reference to empirical evidence on plural work regulation in Indonesia, I argue that the terms have some descriptive benefits for understanding the realities of plural legal orders, but still leaves many aspects under-theorised. Abstrak Terdapat dua istilah kunci dalam karya Keebet von Benda-Beckmann (dan dalam karya rekan-rekan penulisnya, khususnya Franz von Benda-Beckmann) dalam diskusinya mengenai pluralisme hukum, yaitu: 'constellations' ('konstelasi') dan 'entanglement' ('keterikatan'). Kedua istilah ini berkaitan dengan deskripsi keberadaan dan hubungan timbal balik antar sistem hukum plural. Artikel ini secara kritis menganalisis kedua istilah tersebut, penggunaan dan makna tersiratnya, serta membandingkannya dengan konsep-konsep alternatif lain yang digunakan dalam literatur mengenai pluralisme hukum dan literatur serumpun. Mengacu pada bukti empiris mengenai regulasi kerja plural di Indonesia, penulis berpendapat bahwa istilah-istilah tersebut mempunyai beberapa manfaat deskriptif untuk memahami realitas tatanan hukum plural. Namun demikian masih terdapat beberapa aspek yang belum diteorikan. Kata Kunci: pluralisme hukum, pluralisme regulasi, sistem hukum plural, Indonesia, konsep

Hawala in criminal court: the role of law and commercial culture in informal financial exchange

Article

Full-text available

Jul 2024
CRIME LAW SOCIAL CH

Jonathan G. Ercanbrack

A historically informed understanding of ḥawāla and other varieties of informal value transfer systems (IVTS) requires consideration of the normative and cultural elements which structure and facilitate transactions in globalized financial markets. This paper argues that the Sharia-based normative and cultural framework of ḥawāla is created in the social relations of Muslim networks and that, in a criminal law context, this normativity can be used as a tool to discern between legitimate and illegitimate transactions. The new institutional economists’ (NIE) explanation of ḥawāla, which predominates in scholarly work, neglects this common frame of reference built on community, shared belief, and normative rules and expectations. The NIE views economic institutions through the lens of profitmaking and self-interest centred institutional development. Moreover, in a criminal law context, the profit-oriented perspective of law overlooks the normative characteristics that sometimes appear in the transactional characteristics of these transactions. When evidence of these characteristics is presented to the court, they offer a useful tool to differentiate legitimate from illegitimate transfers of value. Legitimate transfers will frequently be facilitated through dense networks in which the normativity and culture of ḥawāla frame the rules and expectations of parties to the transaction. Criminal transactions, on the other hand, typically involve fewer participants, sometimes from different ethnic and linguistic backgrounds, are profit-orientated, and involve means of enforcement such as the use of violence which traditional networks do not employ. The NIE perspective does not fully account for non-western legal orders or for commercial practices in which exchange remains culturally, historically, and socially embedded.

How to create better Hawala regulations: a case study of Hawala regulations in Afghanistan

Article

Full-text available

Sep 2021
CRIME LAW SOCIAL CH

Haroun Rahimi

Hawala is an ancient system of remittance that originated from South Asia. Far from being an anachronism, it continues to play an important role in many developing countries. Hawala provides a user-friendly and inexpensive but also opaque way to move funds within a dense network of Hawaladars across disparate locals. Hawala was historically used to facilitate long-distance trade; however, more recently, migrant workers, criminals, and terrorists also use Hawala to move funds outside the formal financial system. The dominant approach to Hawala regulations fails to consider the context of Hawala usage. This article studies the recent failed attempt by Afghanistan’s Central Bank to regulate Hawala markets to illustrate the shortcomings of the dominant approach. It illustrates how, in Afghanistan, Hawaladars help finance supply chains. It then proposes a new approach to Hawala regulations: formalizing informal credit practices of Hawaladars. Instead of outlawing Hawaladars’ credit practices, Afghanistan should use the offer of inclusion in the formal financial system to incentivize Hawaladars to comply with anti-money laundering regulations. This approach will also improve access to credit for Afghan merchants by ensuring the continued supply of credit by Hawaladars. While here this approach is applied to Hawala regulations, it has broader applications.

How Migrations Affect Private Orders: Norms and Practices in the Fishery of Marseille

Article

Full-text available

Mar 2021

Florian Grisel

The major aim of this article is to examine how migrations affect private governance, taking as a case study the Prud'homie de pêche, a private order that has governed the fishery of Marseille for the past six centuries. Scholarship generally argues that social norms guarantee the efficiency of private orders and their ability to resist the arrival of newcomers. My data suggest that the Prud'homie has failed to accommodate social changes prompted by migratory flows, not despite but because of its social norms. This paper suggests that social norms are not only powerful tools of governance for private orders, but also forces of inertia that can prevent these orders from accommodating social changes.

Order without Law

Book

Dec 1991

Robert C. ELLICKSON

The Afghan Economy: Money, Finance, and the Critical Constraints to Economic Development

Book

Dec 1974

The Politics of Order in Informal Markets: How the State Shapes Private Governance

Book

Jun 2021

Shelby Grossman

Property rights are important for economic exchange, but many governments don't protect them. Private market organizations can fill this gap by providing an institutional structure to enforce agreements, but with this power comes the ability to extort group members. Under what circumstances, then, will private organizations provide a stable environment for economic activity? Based on market case studies and a representative survey of traders in Lagos, Nigeria, this book argues that threats from the government can force an association to behave in ways that promote trade. The findings challenge the conventional wisdom that private good governance in developing countries thrives when the government keeps its hands off private group affairs. Instead, the author argues, leaders among traders behave in ways that promote trade primarily because of the threat of government intrusion.

Why People Obey the Law

Book

Dec 2006

Tom R. Tyler

The Regulation of Informal Trade Credit ( Ograyi ) in Afghanistan

Article

Jun 2021

Nafay Choudhury

This article explores the creation, circulation, and regulation of informal trade credit or “ ograyi ” in Afghanistan. The practice of ograyi allows businesses to access short-term credit, from either their suppliers or third parties, to acquire specified goods. This paper provides an account of the non-legal practices that regulate ograyi transactions. Ograyi vitally depends on the development of trust between parties. Clientelism helps to maintain stable relationships that can offset market unpredictability. Widespread market norms and practices establish the general behaviour of participants. Parties also renegotiate the terms of the contract if circumstances make it impossible for the creditor to repay the loan in the agreed timeframe. Furthermore, bank credit remains largely unavailable or unappealing to many businesses, and the legal system provides limited recourse in the case of contractual breach. Thus, the non-legal practices regulating ograyi serve as a substitute for legal coercion.

Trading Worlds: Afghan Merchants Across Modern Frontiers

Book