Today Hong Kong’s Global Shipping Business Network (GSBN) announced the creation of a Trade Finance Advisory Group, joined by HSBC, DBS Bank and Bank of China (Hong Kong). GSBN’s blockchain network aims to eliminate paper documentation in maritime trade processes, starting with Cargo Release, which launched in July.
All three banks are members of Contour, the trade finance blockchain network with which GSBN has already partnered.
The Asian Development Bank previously estimated the trade finance gap at $1.5 billion. But with a V-shaped pandemic recovery, the International Chamber of Commerce estimated an additional gap of at least $1.9 billion.
A key issue with trade finance, especially for unknown SMEs, is trust. From a bank’s perspective, they lack knowledge about the company and any trade deals. There are multiple potential ways this trust can be addressed, one of which is the ability for the bank to have transactions and documents such as bills of lading verified via a trade platform like GSBN.
“Breaking siloes between supply chains and trade finance is a critical part to unlocking new value in global trade, which is why we’re delighted to have three financial leaders join our mission,” said Bertrand Chen, CEO at GSBN.
Other solutions to address the trust issue include supply chain finance, where the SME can rely on the big buyer’s creditworthiness to raise finance. Blockchain and big data will is also generating new types of credit ratings. Another suggestion from the OECD is a Global Value Chain (GVC) Passport which will help address compliance issues.
“SMEs face multiple challenges on the road to economic recovery after the pandemic. On one hand, they have the challenge of growing revenues while on the other, they continue to be hampered by cumbersome, paper-based processes that create friction when accessing trade finance,” said Sriram Muthu Krishnan of DBS Bank.
“Data and digitalisation can help businesses to be more efficient, while providing greater comfort to financiers. Through this partnership with GSBN, and other like-minded initiatives, DBS looks forward to enabling wider access to trade financing and services for a truly digital journey across data, physical and financial flows.”
To date, GSBN has only announced the Contour partnership. However, in China, its hosting is managed by AntChain and Ant Group has the Trusple blockchain trade finance solution that targets SMEs. DBS Bank is a member of Trusple as well as other blockchain trade finance platforms dltledgers and Marco Polo.
Non profit GSBN is backed by COSCO SHIPPING lines (COSCO) and ports, Hapag-Lloyd, Hutchison Ports, OOCL, SPG Qingdao Port, PSA International, and the Shanghai International Port Group (SIPG).