Yesterday, the Abu Dhabi Islamic Bank (ADIB) announced it completed a secondary market transaction using blockchain trade finance platform TradeAssets. It sold part of its trade finance portfolio to banks in multiple jurisdictions, in what is referred to as ‘trade finance distribution.”
Most banks limit the amount of trade finance that they can take onto their balance sheets. If they hit their maximum, instead of telling corporates they cannot help them, banks can continue providing finance if they sell off part of their portfolio.
ADIB offers Sharia-compliant banking services and has over AED 124.6 billion ($33.76 billion) in assets. The bank has been working with Dubai-based TradeAssets for a year to automate trade finance transactions and digitize traditional processes. It is also a member of UAE Trade Connect another blockchain trade finance platform that includes some of the UAE’s largest banks.
“The completion of the first trade distribution transaction using Blockchain by an Islamic bank shows that ADIB is at the cutting-edge of global transaction banking,” said Haytham Elmaayergi, Global Head of Transaction Banking at ADIB.
TradeAssets developed a blockchain-based marketplace for trade finance with an initial focus on secondary market transactions. The firm launched the platform last year with 25 banks, with a majority of them in Bangladesh. However, now the company has spread its network into other emerging markets with several customers in the Middle East.
The client numbers have now reached 50, including Sumitomo Mitsui Banking Corp (SMBC) and First Abu Dhabi Bank, the UAE’s largest.
Trade Assets describes its solution as an “independent, secure e-marketplace which allows buyers and sellers worldwide to list assets for sale, bid for assets to buy, negotiate better pricing, and exchange relevant documentation.”
Trade finance is a popular blockchain application, and several platforms are currently in development or production. Recently, Singapore start-up dltledgers said it processed over $3.3 billion in trade finance deals.
Three months ago, the Contour trade finance network, previously known as Voltron and the Letter of Credit blockchain, was formally launched though it is not yet in production. Members include Citi, BNP Paribas, HSBC and ING, among others.