The future, fate and the hopes of Small to Medium Enterprises, SMEs are beginning to look brighter as alternative financing is becoming their safe haven after they have been rejected by banks. Banks find it uneasy to finance SMEs for so many reasons which include AML/KYC, counter-terrorism and international sanction regulations and compliance, high transaction costs or low fee income, Basel Capital Regulatory Requirement, etc.
ICC 2020 Survey Reveals deep truths about World trade Finance
The 2020 International Chamber of Commerce ICC survey reveals some foundational truth about the current state of the world’s trade finance. The survey revealed that the COVID-19 pandemic is having a considerable effect (between 20 to 30% decrease) on 2020 trade flows. Furthermore, the survey results showed that 70% of the respondents (346 Banks from 85 countries worldwide) are making concerted efforts in the areas of traditional trade finance while 54% are focusing on Emerging technology, digital trade, and online trade platforms. When the survey opened up the application of Blockchain Technology in Trade finance, the results become interesting. The Report stated:
“From Big Data to blockchain, everyone agrees that digital technologies hold immense transformative potential for the global trade finance industry, which remains largely paper-based. Looking at the reality on the ground, though, how far along are banks in their digital transformation?”
Only 21% of the respondents have, to a great extent, removed the use of paper for settlements and financing, while 46% have removed paper use to some extent, and 33% haven’t removed paper use.
Big Hurdle: Paper-use
It is important to note at this point that the use of paper in the financing of trade is one of the greatest barriers today. It makes the financing process very slow, inefficient, and ultimately less secure. The disadvantage of paper use in financing is more evident especially at this time when the pandemic has crippled everything. For SMEs, the inefficiency of paper-use as a data source creates a much larger problem. Catherine Nomura, president and founder of Kountable said:
“The lack of inclusion of SMEs in global trade is often referenced by the SME trade finance gap, recently, it has become clear that there is a much larger underlying problem. Inclusion shows up and is measured globally as a finance problem, but at its heart, it is a data problem.”
Another crucial point is that Education remains a great challenge for SMEs especially in accessing financing.
What Xinfin Blockchain is doing about these Challenges
XinFin’s Tradefinex was built specifically to solve the problems that many banks today are beginning to tackle. The forward-thinking developers of the hybrid blockchain have already developed a viable solution when banks are starting the journey to identify the essence and use of digital methods in financing. No wonder TradeFinex was identified in a whitepaper by WTO (World Trade Organization) and ICC (International Chamber of Commerce) in November 2019. The paper was titled Blockchain & DLT in Trade: A Reality Check.
Tradefinex seamlessly connects, buyers, suppliers, financiers, and brokers to digitize or tokenize invoices, bills of lading, etc. using smart on the XDC protocol. The use of blockchain technology will ensure speed, efficiency, transparency, and low transaction costs. Since the digital footprint of actions will be recorded on the blockchain, data will not be an issue for SMEs any longer. The platform also opens buyers and suppliers to a new wave of originators which are not banks namely- alternate financiers. The KYC/AML is also on Tradefinex to ensure compliance.
XinFin’s Tradefinex in Education
World of Open Account- WOA “Alternative Finance” learning lab is focusing on the education and exposition of SMEs, Non-bank originators, and other key players to showcase their capabilities. Andre Casterman a recent Xinfin advisor and an advisor for World of Open Account (WOA) is the facilitator for the Alternative Finance learning lab. Atul Khekade, Xinfin Blockchain, and Tradefinex co-founder is also a community expert at the learning lab. One can conclude that Xinfin blockchain is actively involved in the education and exposition of Trade finance key players especially SMEs and Non-bank financiers. This is to show them the advantages of blockchain technology to help them in their endeavors.
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