Today Singapore based DBS Bank announced the launch of its multi-tier trade finance service on a blockchain. The service hopes to make trade financing for Chinese small and medium-sized enterprises (SMEs) more accessible.
Today’s release also revealed that the first transaction on the blockchain, named Rong-E Lian, was completed in August.
Rong-E Lian was built with an unnamed Chinese logistics firm. DBS’ solution running on that blockchain aims to provide secondary or tertiary suppliers, which are often SMEs with little credit history, with trade financing. While direct suppliers don’t have as much troubling gaining credit, their suppliers can be left behind, according to Neil Ge, the CEO of DBS China.
“Cash flow is critical to the sustainability of any business, but even more so for SMEs. However, more than half of SMEs globally tend to face rejection by financial institutions for their trade finance needs, contributing to the world’s trade finance gap of $1.3 trillion,” he said.
Ge added: “By using new technologies such as blockchain and APIs, we hope to democratise trade finance by providing SMEs more affordable and convenient access to bank credit to enable them to realise their business ambitions, serve their customers well and expand into new markets with ease.”
Indeed, DBS’ existing API is used in the Rong-E Lian blockchain to set up participants. The digital onboarding service can verify the supplier’s credentials in seconds. From there, DBS offers trade financing services to “upstream” firms in an efficient, accessible manner.
The Head of Large and Mid-cap Corporates at DBS China, Ginger Cheng, said, “As part of our digital transformation strategy, we integrated financial services into the blockchain platform to develop a new business model and better serve upstream suppliers. As such, we are able to provide integrated trade financing, giving suppliers easy access to financing on-the-go.”
“This is especially beneficial to SMEs as they are offered credit on better terms. We look forward to collaborating with more companies to co-create innovative digital client solutions for supply chains in China,” Cheng continued.
DBS was the first to collaborate with fellow Singaporean firm Agrocorp on its dltledgers blockchain platform last year. This summer, the platform celebrated reaching over $1 billion processed in trade finance.
The major bank has also worked on a project for proxy voting in the Asia Pacific. It boasts other trading platforms including its automotive blockchain and a non-blockchain marketplace for sustainable rubber.
Interestingly, a survey by BNY Mellon and the ICC this year found little confidence in blockchain to address the trade finance gap.