1 In Switzerland, there are no reliable detailed statistics on debt among populations with a migration background. However, it is known that more than half of foreign nationals live in a household that carries debt (Federal Statistical Office, 2017). For households with a migration background from a non-European state, that figure is more than 60%. In contrast, this is the case for fewer than 40% of households composed of Swiss nationals. When we look at the accumulation of different types of debt, [1] which is the indicator the Swiss Federal Statistical Office (FSO) uses to evaluate overindebtedness, we reach the same conclusion. Foreign-born residents are twice as likely as Swiss nationals to live in a household with three different types of debt, and non-European-origin households are almost three times as likely to do so (13%, 6.3% and 16.9% respectively) (Federal Statistical Office, 2017).
2 These figures should be viewed with caution because debt statistics are collected by the FSO at the household level, not the individual level. The sociodemographic characteristics therefore refer to the FSO’s main survey respondent, who is not necessarily the person in the household with debt. The statistics do not distinguish people with a migration background who have acquired Swiss citizenship. In addition, migrants who are not permanent residents are not included in this statistic. Even so, the data raise questions: Is there a link between migration and household debt, and if so, how can it be explained?
3 To our knowledge, the relationship between migration routes and debt has received little attention (Platt et al., 2017: 119). Except for a few studies focusing on labor migration (Davidson, 2013; Hoang and Yeoh, 2015; Mosse et al., 2002; Platt et al., 2017; Sobieszczyk, 2002; Stoll, 2010), the link between debt and migration has been addressed mostly in studies on remittances or debt-financed migration. This article instead draws on the lived experiences of migrants to present more comprehensively the opportunities and risks of getting into debt during the migration process, from arrival to permanently settling in the host country—in this case, Switzerland. [2]
4 Drawing on the recently developed socioeconomics of debt (Guérin and Venkatasubramanian, 2020) and the work of Zelizer (2004 and 2015) on commercial and remittance circuits, we developed the concept of transnational debt circuits to account for the different forms and functions of debt during the migration journey. We show that migrants’ debt is part of transnational debt circuits that involve various practices of economic exchange (e.g., loans, donations, remittances) with functions and social meanings that are specific to migration. In this sense, indebtedness is an economic experience, as well as a moral and social one. This undermines the widely held view that debt, and particularly overindebtedness, is the result of a lack of financial knowledge and skill—that is, that debt is essentially caused by a deficit in economic and cognitive skills such as calculating, budgeting, anticipating, and saving. [3] This article questions this idea by analyzing the lived experiences of a population rarely considered in studies on indebtedness and whose specific forms of indebtedness are only rarely studied in the field of sociology of migration.
Debt and Migration
5 A link between migration and debt has mainly been addressed in the literature on debt-financed migration and on remittances, a neologism derived from the Latin verb remittere (to send back). Remittances are financial transfers that migrants make from the host country to people (e.g., parents, other relatives, friends) living in the country of origin (OECD, 2006: 151). These two research streams start from the observation that the costs of migration are high, and few individuals or families can finance migration themselves. As a result, prospective migrants have to rely on various lenders (e.g., relatives, banks, private lenders, employers).
Debt-Financed Migration
6 The first scholarly article explicitly addressing debt-financed migration and its consequences was in 2006, by Friebel and Guriev (see also Djajić and Vinogradova, 2011: 4), who developed an economic model examining the conditions under which moneylenders (and sometimes smugglers) provide loans to clients. According to the authors’ model, lenders have a vested interest in their client’s illegal status, as it is easier for them to secure the terms of the contract through coercion and threat. Debtors who obtain legal status risk defaulting on the contract, as the law protects legal workers (Friebel and Guriev, 2006). Other publications have highlighted the economical constraints that indebted illegal migrants experience—especially debt bondage, when the employer or recruitment agent is also the creditor (Marius-Gnanou, 2008)—or repayment constraints that disallow migrants from terminating their work contract, even in abusive conditions (Djajić and Vinogradova, 2011; International Labour Organization, 2016; Marius-Gnanou, 2008). Other types of constraints include migrant women’s economic subordination within couples (Mellini and Poglia Mileti, 2016) and sexual exploitation related to debt repayment (Gustafsson, 2005; Kara, 2010). These new forms of slavery are regularly denounced (United Nations, 2016).
7 This negative view of debt as inducing relations of dependence, precariousness and asymmetrical power in the labour market, however, has been qualified by other research noting that debt can also be a choice, one that favours mobility in order to guarantee freedoms in the future (Davidson, 2013; Platt et al., 2017). From their observations of debt bondage in India, for example, Guérin and Venkatasubramanian (2020) noted that, while financial exploitation is an important consideration, debt also has other functions: it can be a source of sociability, employment, information, protection and emancipation.
Indebtedness and Remittances
8 The phenomenon of remittances is of considerable financial magnitude (Bolzman and Guissé, 2010). For example, in 2015, migrants living in Switzerland remitted almost twenty-five billion Swiss francs abroad, [4] ranking fourth behind migrants living in the United States, Saudi Arabia, and Russia (World Bank Group, 2016: 14). In the literature, remittances are closely associated with personal debt because repayment either reduces the amount of money an individual will send to the home country or part of the remittance consists of a debt repayment (Platt et al., 2017).
9 Research addressing the link between remittances and debt initially addresses the positive aspects of migration, as both host country and country of origin appear to be beneficiaries of migration cash inflows (Findlay, 2001). At the macroeconomic level, these financial transfers allow the country of origin to access external financing at a lower cost than borrowing it from a foreign country (Gosh, 2006: 55). At the microeconomic level, which is of particular interest here, the remittance literature identifies three main functions of debt in the context of migration: investissment, debt repayment, funding remittances.
Investment Debt
10 Unlike the neoclassical approach, in the new economics of migration, an individual’s decision to migrate is not only a cost-benefit calculation but also a collective strategic choice (Laiz Moreira, 2012; Piguet, 2013). In this case, debt could be the result of a collective strategy to invest in the individual’s project of migration. For migrants, debt boosts geographic, social and economic mobility (Hoang and Yeoh, 2015; Platt et al., 2017; Stark, 1991; Taylor, 2006). For migrants’ relatives, granting a loan to a family member who will migrate is an “implicit contract” that binds the parties and ultimately provides relatives with steady income through the lendee’s later financial transfers (Rapoport and Docquier, 2006: 28). For other authors, an “implicit family loan contract” (Poirine, 1997) forms well before the migration project, when parents invest in their children’s education with the hope that it later bears fruit (El Hamma, 2015: 99). In all these cases, debt can be understood as a collective investment in migrants’ social and economic upward mobility, the fruits of which they will share with relatives and community members.
Debt Repayment
11 According to the new economics of migration, transnational remittances are partly due to debt-financed migration. Large sums of money that migrants send home can be seen as repayment of investment debt, as described above (Agarwal and Horowitz 2002; Poirine 1997). Several studies of remittances by Afghan immigrants (Monsutti, 2005; Siegel and Loschmann, 2015) qualify the debt-as-repayment view, with indebted migrants transferring money less often and in smaller amounts than those who are not indebted.
Debt as a Source of Remittance Funding
12 While debt is initially considered a gain for both sides in the exchange, this “win-win” view is less positive if we focus on the difficulties encountered in financing remittances (Platt et al., 2017). In a study of Filipino migrants in Italy, Basa et al. (2012) proposed the notion of a debt chain to emphasize that debt repayment is sometimes part of “inter-temporal family contracts” (Rapoport and Docquier, 2006) in which debt begets debt. This involves “accumulating high-interest loans to pay off previous debts” (Basa et al., 2012: 45), which further decreases a migrant’s available budget and perpetuates “a system of debt and dependency” (Mosse et al., 2002: 60).
Theoretical Framework of the Survey: Debt Circuits Specific to the Migration Experience
13 We can draw several conclusions from this brief review of the literature. First, debt has several functions in the migration process. It implies duties and obligations, but it also offers opportunity for emancipation. These functions vary according to one’s stage of migration. Debt is a source of freedom, as it allows one to depart for other horizons and seek a better future, but it can become a constraint and source of oppression during repayment, its emancipatory function being restored only afterwards. Second, the dominant interpretation of overindebtedness as resulting from inadequate economic behavior, such as lack of management, planning, or financial literacy, is challenged by the existence of another form of debt: communal debt, in the sense that individuals take on debt so that others, who are often geographically distant, benefit from the borrowed funds. [5]
14 To better grasp the temporal, transnational and dynamic dimensions of migrant debt, we based our analysis on the four principles of Elder’s life-course paradigm (Elder, 1998; Elder et al., 2013; Elder et al., 2003); these are particularly useful for grasping the dynamics of debt processes (Henchoz et al., 2021: 1). First, the principle of insertion into a historical, social, economic, legal and institutional context emphasizes the role of the living environment. According to several studies, individuals’ economic behaviors are determined more by the context in which migrants live than by their cultural background (Carroll et al., 1999; Solheim and Yang, 2010). Research on debt bondage has shown that immigration laws can contribute to promoting or disfavoring coercive debt collection practices and various other forms of abuse of indebted migrants (Davidson, 2013; Standing, 2011). Second, the principle of temporality or development over time invites us to situate debt within a life experience, here, the different stages of migration. Third, the principle of connected lives suggests that debt is embedded in the relationship networks in which an individual engages. Fourth, the principle of intentionality suggests that people have individual capacities and strategies that influence their economic situation and status.
15 An additional observation that can be drawn from our literature review is that explanations of the link between debt and migration are essentially based on a material approach to debt, that is, as a financial transaction defined in terms of price, collateral, and repayment terms. However, according to the socioeconomics of debt developed by Guérin and Venkatasubramanian (2020), debt is not just a material transaction but also a power relationship (inseparable from a set of interdependencies, protection and social differentiation) and a social and moral experience (imbued with subjectivity, felt obligations and aspirations).
16 Taking these different elements into account led us to develop the concept of the transnational debt circuit, which refers to the “commercial circuit” and “remittance circuit” proposed by Zelizer (2004 and 2015). These account for the fact that money—in our case, debt—is not a homogeneous reality. Drawing on Zelizer’s approach, different forms of debt can be distinguished according to the context and stage of migration in which they take place, the social relations in which they are embedded, the media through which they transit and the particular functions that those involved attribute to it. The circuit illustrates, in our view, the dynamic circulation that characterizes the process of indebtedness as related to undertaking the journey of migration: circulation of people in various geographical spaces, circulation of financial flows across borders, circulation of exchanges within (sometimes quite distant) social relations, circulation of the status and positions of partners in the exchange, and so on. In this sense, the transnational dimension characterizes the various dimensions of the circuit that go beyond a specific national framework.
Population and Method
17 Thirty-seven in-depth interviews were conducted in French-speaking Switzerland between 2016 and 2018 with eighteen women and nineteen men. [6] To recruit the sample, we favored purposive sampling (Patton, 1990), which has the advantage of favoring rich information about the research question. We deliberately selected a wide range of distinct profiles (Emmel, 2013). Apart from having migrated and being or having been in debt, [7] the interviewees were of various ages (nineteen to sixty-nine) and origins (nine from Sub-Saharan Africa; two from North Africa; three from the Middle East; thirteen from Europe; six from Asia; four from South America). They had very disparate net incomes, ranging from a few hundred to more than 10,000 Swiss francs per month. The sample was recruited from among students and company executives, including sales, construction and care workers. Debts held ranged from a hundred francs to several hundred thousand francs. As Patton (1990) has pointed out, our objective was not to generalize the results, but to identify similar experiences in order to highlight significant common patterns and intrinsic variations for a population with a varied sociodemographic profile but a common experience: migration.
18 The analysis of interviews is based on principles of grounded theory (Glaser and Strauss, 1967; Strauss and Corbin, 1997). We aimed not to describe the economic situation or issues faced by a certain category of migrants, but to uncover specific links between debt and migration. In this sense, the analysis focuses mainly on elements in the interviews that explicitly reference this link. However, some of what interviewees described also extends into the Swiss population more broadly. For example, we identified ignorance of how the Swiss tax system works as a risk for having debt—which also has been found among young people born in Switzerland (Henchoz and Coste, 2017). In both cases, indebtedness appears at a stage of the biographical journey. In fact, what makes debt so specific to the migration journey is not so much entering into a particular debt circuit but facing a specific configuration of debt circuits.
Migration Routes and Transnational Debt Circuits
19 The results highlight the specific debt circuits that can occur at different stages of migration. Notably, these debt circuits are not mutually exclusive. Similarly, it is difficult for us to specify the relative importance of each debt circuit, as a person may experience several of them. Moreover, it is difficult to specify their chronology, as some phases of indebtedness may cross back and forth into different stages or times (Duhaime, 2001). In this sense, the chronology presented below is indicative.
The Initial Debt Circuit
20 The initial debt circuit is intrinsically linked to conditions of departure from the country of origin and conditions of arrival in the host country. In this way, it depends closely on regulations and legislation in force. As previously mentioned, the debt some migrants we interviewed took on in the country of origin was essentially to enable them to carry out migration. It helped finance costs the migrant could not have covered individually (e.g., travel costs, visas, purchases). This relates to the investment function of debt, as described earlier. For migrants, however, it is a question not only of financing their move and installation in the host country but also of facilitating access to employment, [8] since for some of them, employment is a condition for staying in Switzerland. Indeed, the Agreement on the Free Movement of Persons (AFMP) facilitates the conditions of residence and work for citizens of the European Union in Switzerland, and if those rules also apply to people from the member states of the European Free Trade Association (EFTA), but this is not the case for the nationals of many other states. Instead, they are subject to the law on foreigners and integration, which in principle does not give them the right to work in Switzerland unless an employer requests and obtains a work permit for them. [9]
21 One of the interviewees, Joaquim, had to follow these rules before Switzerland signed the AFMP in 1999. Like many migrants still facing the same requirements, he went into debt to his relatives to pay an intermediary in Switzerland to find him a job:
“To find work here in Switzerland, I had to pay a kind of deposit so that someone who works here could find me a job. I paid the equivalent of six months’ salary down there [in Portugal]. […] In those days, my salary was 6,000 escudos. […] So I had to borrow from my two brothers-in-law. Each one made a small advance. They gave me the money, but it was like a loan that I had to pay back. And the repayment, I made it within a year, once I arrived in Switzerland.”
23 While debt is a way for migrants to gain access to better job opportunities, it can also be seen as an investment in the future for remittance providers back home, who may have gone into debt themselves, dipped into their savings or sold some assets to help finance the migration. With the departure of a family member, families may also lose a source of income. As a result, migrants face high expectations and often pressure to repay their debts as quickly as possible. [10] While it may not be considered debt bondage, this leads some of them to accept jobs with unenviable working conditions and that require a lot of time:
“There are many locals who are in Switzerland now who are in the process of paying off their debts first […]. They find themselves sometimes with a lot of work, they are exploited and they can’t live properly so they are here working like crazy to be able to send money.”
25 Repayment of the initial debt may affect one’s working conditions, and it also may affect one’s living conditions more generally. For example, it weighs heavily on sometimes very modest household budgets (Hoang and Yeoh, 2015; Mosse et al., 2002) and requires restricting expenses on leisure and material goods that are not considered essential. In this sense, not only are migrants’ professional and financial lives affected, but also their social and emotional lives are. For example, some may refuse invitations or outings that are likely to develop their social network because they would incur expenses that reduce their ability to repay debt. This lack of social capital can have consequences for debt, as the following circuit shows.
The Circuit of Indebtedness Due to a Lack of Cognitive and Social Capital
26 Newly arrived migrants find themselves in a context of unfamiliar administrative rules and laws. For example, in Switzerland, the payment of basic (compulsory) health insurance premiums and taxes is the individual’s responsibility, as these charges are not deducted directly from wages as in some countries. Arrears on these expenses are the most common debt among migrants in Switzerland, and people of foreign origin, especially from non-European countries, are much more affected than those born in Switzerland. [11] According to our interviews, this can be explained in part by a lack of information and knowledge on the subject. In this sense, entry into this debt circuit depends on the resources available to migrants to cope with a new legislative and administrative context:
Aristide’s comment highlights two important elements that reinforce the consequences of this lack of information. On the one hand, the workings of the Swiss tax system mean that it can take several years for the state to demand payment of taxes in arrears. [12] Those who have accounts in arrears accumulate late fees and costs with delays and receive notice to repay amounts that are often far beyond their budgetary capacity. On the other hand, migrants’ lack of knowledge about this system is often combined with a lack of social capital, which is measured here by the ability to call on a network of acquaintances for information and support, whether material or not. This does not mean that migrants are alone or isolated, but that they are unable to benefit from or rely on a social network in cases of economic or administrative difficulties.“I feel like a slave to Switzerland, excuse me for saying so, I feel like a slave! […] Taxes are what eats me up […]. I told Mr. F. [tax collector in charge of his file]: ‘But you never asked me [for the late installments]!’ You know what he said to me, ‘We’re not here to tell people what to do.’ I said, ‘Foreigners who can’t read or write well, what do you do with them?’
‘Ah, but sir, we are not here to educate.’ I’m in trouble, I have no family here, I have nothing. That’s why I tell you I’m a slave to Switzerland.”
Debt Circuits Linked to the Economic and Moral Obligations of Migrants to their Relatives
27 Once they are settled in Switzerland, or sometimes even immediately upon arrival, most of the migrants we interviewed reporting having faced specific financial and moral obligations that led them to send part of their income back to their country of origin. The literature has already highlighted the link between remittances and debt, and for our part, we identified different types of financial obligations linked to specific forms of remittances (Henchoz and Poglia Mileti, 2017, 2018) and to characteristic debt circuits.
Emergency Solidarity Debt
28 The emergency solidarity debt circuit obeys the logic of donations and solidarity. It is not based on a contractual or self-interested logic: the debt does not directly benefit the borrower, but rather his or her relatives, and the migrant expects no repayment. This circuit specifically involves debts that migrants take on when they send money to their country of origin in response to an emergency (e.g., war; political, health or ecological crisis; the death or illness of a relative). As Paulo pointed out, personal debt is a quick financing solution that can meet recipients’ needs as quickly as possible:
This debt circuit is mainly mobilized by populations from “risk zones,” determined by climatic or geopolitical situations. It is ad hoc and set up in an emergency, sometimes without taking precautions regarding loan conditions. In this situation, migrants reported a preference to borrow from friends and family who are established in Switzerland, especially from the same country of origin, as they perceive it as the easiest and quickest way to access funds. There is no need to explain the situation or convince people—everyone knows about it and seems inclined to participate in this mutual-aid network. Nevertheless, the people who migrants approach for loans may also have been approached by others or may not have the necessary resources. In this case, migrants who are eligible for access to loans or consumer credits turn to the formal economy; those who are not turn to the underground debt economy, which is more likely to respond quickly to their request (see below).“There was this special case where they needed money because something had happened. And I didn’t have the money, so I asked Anja, and she lent me the money. So if someone asks me and they absolutely need the money, I find it. There are always possibilities to earn some money in Switzerland. Nowadays, I am also allowed, for example, to take advances [of salary] at work.”
Debt to Support Elderly Parents
29 In debt to support elderly parents, the logic of giving and solidarity is also present, as the debt does not directly benefit the borrower. However, the recipients of borrowed money are different in this circuit: parents, typically in the country of origin. The purpose of these loans is to guarantee payments that are informal “social insurance/old age insurance” (Henchoz and Poglia Mileti, 2017 and 2018). For migrants, it is a matter of supplementing or compensating for insufficient (or nonexistent) social insurance in the country of origin. Those most concerned with this type of debt are from countries with an undeveloped or underdeveloped welfare state and those whose parents have modest incomes and/or are elderly.
30 According to interviewees, these payments made to parents are an integral part of their budget, a kind of pension to be paid regularly. While this can be seen as a form of repayment of an initial moral debt, as described earlier, interviewees presented it more as the result of solidarity, a duty or a filial commitment. In this sense, these payments are never questioned, and no repayment is expected. Even when migrants experience economic difficulties in Switzerland, this part of the budget is preserved. Donors prefer to reduce other expenses, delay certain payments and juggle different budget items rather than reduce or eliminate this debt.
31 Unlike emergency debt, taking out a credit or bank loan to finance this type of payment is rare, as such loans are considered expensive, onetime solutions, reserved for exceptional situations. Instead, the debts originate from making room through available financial tools, which means they are (at least initially) part of the organized planning of household finances, as Maju notes:
“Sometimes I see that my [credit] card is in debt […]. But I still say, ‘Send the money.’ I don’t mind at all that we are in debt and that it is deducted from my salary. We are very lucky to be in this country. We have a lot of means to live unlike in Sri Lanka […]. We try as much as possible to have the lowest debt burden so that we can provide for our needs, but also for their needs. So, really it’s management.”
The Collectivization of Debt Repayments
33 So far, we have looked at the circuits related to migrants’ economic obligations from the perspective of the collectivization of resources. In some cases, the borrowed money benefits a much wider network than the debtor himself. This solidarity in indebtedness can also be part of a circuit linked to collectivization of the burden; that is, migrants participate in the repayment of debts contracted by third parties. This is particularly the case when it concerns relatives. We thus observe a particular form of debt inheritance that is agreed upon and results from individual initiatives. Thus, Kim pays off the debts of his grandmother who stayed in their home country:
“I gave a small amount to my grandmother, also for debts, it’s a small amount, I gave once. My aunt said, ‘I’ll pay you back.’ But I said, ‘No, no, it’s for grandma!’”
35 The collectivization of third-party debt repayments is essentially a matter of filiation. As we will see in the next section, debt relations among siblings and more distant relatives have principles other than those of the donation. For example, Kim pays off her father’s and grandmother’s debts for nothing, but when her sister, who also lives in Thailand, asks her to do the same, she refuses and offers to give her a loan.
36 In the debt circuits just described, the nuclear family is a single economic entity. This is not a situation specific to migrants. It is also found in economically disadvantaged environments where families need to pool resources in order to balance the family budget (Schwartz, 1990). We can therefore assume that the least professionally qualified migrants and those with the lowest incomes are more likely in these circuits, where collectivized debt follows common interests. This hypothesis is supported by the fact that these populations spend more money on emergencies and assistance to the elderly than others do (African Development Bank, 2007/2008).
37 Although this type of debt is a significant financial burden for those with very modest budgets, interviewees did not present the collectivization of debt as a burden or sacrifice. Instead, they suggested that it corresponds to cultural and familial codes of mutual aid in their country of origin. Being able to help one’s family, even if through a loan that will weigh heavily on one’s budget, is described as an attained social status: income provider, and reliable employee in those cases that people have taken debt from a Swiss banking institution. In these cases, the act of indebtedness can be a source of pride and respect, as it testifies to the sacrifices and risks that the debtor takes on to fulfill a moral duty to loved ones (Guérin, 2012: 197).
The Debt of Mutual Emancipation
38 The circuit of mutual emancipation concerns relatives and particularly adult children, siblings and other relatives who have remained in the country of origin. According to our interviews, parents are not involved in mutual emancipation. As with other debt circuits, in this one the migrant’s financial effort benefits others. Nevertheless, it is less a question of showing solidarity than of investing with the aim of eventually freeing oneself from the duty of support. In this sense, this type of indebtedness is an investment to promote the eventual emancipation of both exchange partners (Henchoz and Poglia Mileti, 2017). Getting into debt provides one with financial capital, which will be paid to recipients, who will in turn generate social, cultural and entrepreneurial capital to promote their economic independence—at which point migrants should be freed from their financial support obligations. This investment takes different forms depending on the recipient’s age; the most mentioned were financing education; helping with the purchase of a house, car or business; and supporting entrepreneurship.
This debt circuit moves away from the logic of donations and disinterest. The exchange between the two parties is more formalized than in the previously described circuits. Even if this is not always the case, it may be contractualized. In any case, the transfer of money is not without conditions. The recipient’s creditworthiness will be assessed according to objective criteria, similar to those of the formal banking system (e.g., ability to repay based on disposable income), and according to subjective criteria (e.g., trust, recommendations, reputation, interpersonal skills) (Gonzalez-Vega et al., 2007). Some migrants will ask for interest or loan repayment. For others, repayment is not important; rather, what is essential is completion of the project for which the loan was taken out. In any case, this type of financial arrangement legitimizes a certain control by the migrant lender over the recipient’s activities in order to measure the evolution and validity of the investment. When the goal is achieved, the debt is beneficial for both parties, even if it contributed to a temporary increase in a migrant’s financial burden or left them with less room to maneuver to start their own business or live more comfortably (Basa et al., 2012). Conversely, when the recipient fails to fulfill his or her part, in the eyes of the migrant the debt has become an unnecessary sacrifice at the expense of his or her own well-being. Breach of contract may involve significant financial loss for the migrant, but it also leads to a form of emancipation: the migrant now has legitimate arguments to stop sending remittances.“Yes, I went into debt for them, because they came first. So I had taken out loans, credit applications, things like that. Afterwards, of course, a loan that you pay back every month, because finally several times, we tried to make them manage on their own: buy a store, do things. […] So, it was at that level that I had to take out loans, so that they could, I don’t know, open something, always with the aim of being autonomous so that they didn’t need us.”
The Informal Debt Economy Circuit
39 Debt circuits are defined not only by the reasons for personal debt, but also by the terms and conditions by which one enters debt. Thus, migrants cannot always turn to the formal economy or to relatives to obtain liquidity. [13] A certain number of them seek solutions in the informal economy. Several of the migrants we interviewed had taken out loans through acquaintances, usually from their community of origin. These informal loans involve other actors and meet other conditions than those described earlier. Indeed, the debt circuits linked to the economic obligations of migrants toward relatives that we described previously can be qualified as nonmarket transactions, in the sense that the exchange links things and people (Dufy and Weber, 2007: 27). Debt is not reduced to a sum of money; rather, it engages and symbolizes people, it says something about their relationship. In the circuit of the informal debt economy, debt is like a market transaction. The exchange is distinct from people. Its nature, price, and conditions may be more flexible and adaptable than in the formal economy, but the debt responds to the market logic of rationality and profit. As Fred points out, the financial transaction has meaning and interest only for itself:
“It’s more among Filipinos [that the loans are made]. Frankly, because we get interest like if I give 200 francs, he’ll give me back […] 250 francs, so it’s cool! […]. If they don’t pay back, we report them. They don’t have any papers, so they are under pressure, they have to pay back. Some people have made a lot of money this way […]. [Mr. X], a Filipino, can lend you 10,000, 20,000 francs, whatever you want, but the guy, he makes you sign stuff and everything, it’s well controlled and if you don’t give [the money] back, he sends you to the cops.” [14]
41 This interest rate called “five-six” (a person who borrows five units repays six, i.e., a nominal interest rate of 20%), is common practice among moneylenders in the Philippines (Kondo, 2003). In Switzerland, it is punishable as usury under the criminal code (Art. 70, 157 Swiss Penal Code), since there is likely exploitation of weakness and a disproportion between monetary benefit and loan consideration. The federal law on consumer credit sets a much lower maximum interest rate and requires a financial background check for solvency.
42 Although the rules and regulations of this informal debt economy are not in favor of debtors, some may still perceive it as attractive. As Guérin et al. (2009) show for India, the informal debt market offers quick and easy access to money and allows flexibility in repayment terms, duration and interest rates. On the side of “lenders” like Fred, control and threat offer some guarantees of repayment. However, this is not always enough. While Fred thought he was making a good investment by lending money to his fellow countrymen, he also went into debt by taking out telephone plans in his name that were then resold to people in his community. The latter did not pay the bills, which led to Fred being sued on their behalf (the equivalent of a formal notice in France):
“My mother used to make me do a lot of shenanigans, like giving [phone contracts] to her friends because they are not Swiss. They don’t have a permit [to stay], they can’t make [subscriptions—contracts]. So I was doing the subscriptions. […] I needed money. My mother offered me 300 francs just for my name. […] Then there were problems, because [his mother’s friends] didn’t pay anymore.”
44 This example highlights the limits of these informal financial arrangements when they fall somewhere between market and nonmarket exchanges. Fred can hardly use coercion with his mother’s friends, so loses a main lever at his disposal to ensure that transactions go smoothly.
45 It is difficult to assess the extent or breadth of this debt circuit, but several interviewees referred to it. If one can speak of a specific circuit linked to an informal debt economy that escapes all state control, the following section shows that the line between legality and illegality is sometimes very blurred in matters of indebtedness.
The Circuit of Debt by Canvassing
46 At first glance, there is nothing to suggest that in Switzerland there is a formal economy debt channel (i.e., with banking or credit institutions) that is specific to migrants. However, in our research, many immigrants reported having been the object of targeted sales calls by employees of banking institutions from their same country of origin. For example, Roberto was contacted by a bank employee who explicitly referred to their common culture. According to Roberto, these exchanges gave his parents confidence and led them to encourage their son to take out a loan or consumer credit:
“My parents asked me to take out a loan […] so I took out a loan for 10,000 francs. […] I phoned [the Portugal-born bank employee]: “Listen, I need 10,000 francs. [Imitating a high-pitched female voice]: ‘You only want 10,000 francs?’ “Yes, I only want 10,000 francs. ‘But they would have lent me 40–50,000 francs.’”
48 These sales calls to promote loans and other kinds of consumer credit, as well as the encouraging of larger loans than requested, is legally questionable. [15] However, this does not seem to be specifically related to migration but is a practice regularly denounced by organizations working on the topics of debt and overindebtedness (Blessing and Pfirter, 2021). These calls also contribute to creating a market, that is, a demand to meet a preexisting supply. As Ducourant (2012: 383) pointed out in a study conducted in France, the salesperson suggests possible uses of money by telephone and makes “arguments that would be difficult to make other than from a distance,” for example, the use of a loan to pay taxes and other debts or to compensate for a lack of foresight. It also saves the customer the “ordeal” of going to a bank and being subjected to others’ evaluation and judgment (Lazarus, 2009). In other words, sales calls provide migrants with new reasons and opportunities to take on debt.
49 In Roberto’s case, the loan took place according to market rules, but even so, migrants face other forms of solicitation. Two of our interviewees from armed conflict zones said they were pressured by organizations in their home countries to take out a loan to support the war effort. They did not wish to be recorded for fear of being identified. It was also not possible to go into the details of this debt circuit, as the individuals refused to talk further on the subject.
50 It is very likely that this last case is to be distinguished from Roberto’s case. However, given the lack of information, we have grouped them together in the same transnational debt circuit; although the entry into debt is based on different factors (e.g., trust, opportunities, fear, militancy), it is the result of targeted solicitation based on membership in a community and carried out by individuals on behalf of the organizations they represent. It is difficult to elaborate on this any further, but we do suggest that migrants and foreign nationals are more likely to enter this type of debt channel. This type of solicitation based on membership in a specific community was never mentioned in interviews with those born in Switzerland.
Conclusion
51 Further analysis is very likely to reveal other transnational debt circuits. Our reading of the circuits we have identified here is undoubtedly partial, as the concept of debt circuits emerged during our analysis. The data collected only sketch an outline; more systematic research is needed to clarify their modalities. However, this study is rich in lessons for economic sociology and the sociology of migration because it gives an account of the conditions of production of debt circuits that are specifically linked to migration.
52 The transnational dimension of these circuits highlights an aspect of indebtedness that has not yet been sufficiently thematized, namely its geography. The debt circuits we have examined are defined by spaces and places. This implies not only historical, social, economic, legal and institutional contexts of the countries concerned, but also the migrant’s conditions of departure and arrival, status in the host country, transnational social network, resources and knowledge, ability to act in a new context, and the circulation of rights, duties and obligations across borders. In this sense, this study is particularly illustrative of the interweaving of the different dimensions of the life course highlighted by Elder in configurations that produce the possibility of an individual taking on particular forms of indebtedness.
53 This study also challenges the widely shared perception of debt as an individual phenomenon, often seen as the consequence of a lack of financial or cognitive resources, or the result of improvidence or inadequate economic rationality. Debt is certainly a financial transaction, but like the socioeconomics of debt, we show that it is also a relationship, or a social and moral experience, and a market, that is, a status and a set of rights and obligations part of a specific life course. In this sense, the forms of indebtedness are multiple and the concept of circuit accounts for the dynamism of this process in its attention to circulating things, goods, people, statuses and positions.
54 Our approach is not entirely new. The concept of “debt career” developed by some German-speaking authors (e.g., Reiter, 1991) pursues the same goal but focuses on the individual’s history and path. The concept of debt circuits invites us to adopt a more “matrix-like” understanding of debt by situating it in specific geographical, political, economic, social, relational, moral and symbolic spaces. Indeed, the individual and his or her abilities or background are less important than the configurations that can lead that individual to take on debt. In our view, distancing ourselves from the individual is paradoxically the price of adopting a more comprehensive approach. Moving from “who is in debt according to what type of debt” to “how one gets into debt and why” allows us, though, to move away from a guilt-ridden vision of debt that would essentially be a matter of individual responsibility or fault. However, it remains to be confirmed whether this proposed reading is relevant beyond our study, for example by applying it to other categories of migrants, in other national contexts or among a nonmigrant population.
Notes
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[1]
In its survey, the FSO considers different types of debt (e.g., arrears, car leases, debts to relatives, consumer debt).
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[2]
We use the term migrant to refer to people who themselves migrated to Switzerland (not their descendants).
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[3]
Ramsay (2011: 13) notes that the concepts of individual responsibility and financial literacy are important in policy circles and for debt management and debt relief institutions. The OECD cited lack of financial knowledge or capacity as a cause of overindebtedness as early as 2005 in encouraging member states to develop financial literacy strategies. However, the presupposition of financial illiteracy as the basis for these programs has been challenged by research in anthropology and economic sociology (Guérin, 2012; Henchoz, 2016).
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[4]
At the beginning of 2021, 1 Swiss franc was equal to approximately 0.90 euro. In this text, all references to francs are to Swiss francs.
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[5]
Indebtedness to others is not a practice reserved for migrants. In 2010 in France, 5% of respondents living in an overindebted household attributed financial difficulties to intergenerational mutual aid (Banque de France, 2011: 8). In Switzerland in 2015, almost 8% of the population that consulted a service of Dettes Conseils Suisse for debt management or debt relief attributed financial problems to third-party support (Dettes Conseil Suisse, 2016: 14).
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[6]
Interviews conducted as part of research funded by the Swiss National Science Foundation on debt processes in Switzerland (2015–2019) and as part of two master’s-level sociology seminars on remittances. We thank the students from 2016 and 2018 for their important contribution to this article.
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[7]
These are people born abroad who retain their original nationality or acquire Swiss nationality through naturalization.
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[8]
According to the FSO, work is the main reason for migration—well ahead of family reunification and studies (Kristensen, 2017: 9-10).
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[9]
For people who entered the country through the asylum system (LAsi), access to the labor market is limited or difficult, even if they have obtained refugee status and have residence permits allowing them to stay in Switzerland permanently.
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[10]
Repayment can be more or less long. In the case of Chinese migrants who entered the US irregularly, it has been estimated between four months and four years, with an average of twenty-six months (Chin, 1999: 119).
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[11]
In 2017, 15.8% of Swiss nationals had been in arrears at least once, compared to 28% of foreign nationals living in Switzerland and 37.8% of non-European nationals (Federal Statistical Office, 2017).
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[12]
Under the Swiss tax system, the taxpayer pays provisional installments throughout the tax year. The final amount due is calculated in the following year. The difference is then billed to the taxpayer or refunded, depending on the situation.
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[13]
In Switzerland, according to Article 28 of the Consumer Credit Act, to take out a loan from a bank, one must be able to repay the loan in full within 36 months.
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[14]
The maximum interest rate currently set by law is 10% for consumer credit and 12% for credit cards. In Fred’s example, it is 25%.
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[15]
According to consumer law, advertising for consumer credit must not be aggressive. However, the interpretation is left to the discretion of the lenders.
