On 27 June the Agricultural Bank of China (ABC) issued the first agricultural mortgage for $300,000 on a blockchain. ABC is one of China’s big four banks and is majority owned by the State.
According to local media, the blockchain pilot system was initiated by the People’s Bank of China (PBC) which is China’s Central Bank. One of the main goals it to prevent land being used as loan collateral multiple times.
In addition to ABC and PBC several other government agences host nodes on the blockchain. They include the Land and Resources Bureau and the Agriculture and Animal Husbandry Bureau.
The first benefit of using a blockchain is the hosting of information on multiple servers makes it hard to tamper with data. By sharing the data across banks and government departments, the collateral can be tracked. Hence it avoids the asymmetry of information between the farmer and the banks and prevents double mortgages.
Secondly, the system makes the mortgage process more efficient. Because it’s an online system farmers don’t have to visit branches repeatedly, and the whole process is quicker.
Finally, this is ABC’s first blockchain application experiment and hence it’s a learning experience.
ABC plans to offer a tea farmers e-loan and use land rights and housing property as guarantees. Hence, this will require similar collateral information to the mortgage project.