With a growing chorus of banks in the Emirates increasingly exploring blockchain technology to optimize trade finance, one bank has completed its first live end-to-end blockchain-based trade with Bangladesh’s largest Islamic bank.
Moving US$6.5 million-worth of goods for Western Red Spring Canadian Wheat from Canada to Bangladesh, Abu Dhabi Commercial Bank (ADCB) is the first bank in the UAE to demonstrate a successful trade transaction leveraging distributed ledger technology. The transaction, which involved Islami Bank Bangladesh, SGS Surveyor, Richardson International Shipping Canada, Banjo Auto Flour Mill Bangladesh and Singaporean trading house Agrocorp, was facilitated by Singapore-based dtledgers which has executed over US$1 billion in trade across at least 30 banks.
The flow mirrors the traditional letter of credit process, involving agreeing the terms, the application, the issuance, the advising, the amendment request and its approval, the document presentation, the discrepancy resolution, and the bill settlement instructions. The efficiencies stem from using a single blockchain network for all participants, instead of relying on multiple systems.
With global trade finance gap expected to widen to US$2.5 trillion by 2025 (according to World Economic Forum), it isn’t surprising banks are being creative in tapping this unmet and lucrative demand. This quarter alone, eight banks including Abu Dhabi Islamic Bank, joined the UAE Trade Connect, a nationwide blockchain trade finance platform launched by Etisalat Digital in partnership with First Abu Dhabi Bank and Avanza Innovation. Trade finance has been highlighted as a crucial growth area for Islamic banks in particular.
“We could potentially reduce our financing costs by at least 15-20% through dltledgers technology, saving significantly on the costs of physically moving documents. Moving onto the electronic system, we are also able to access earlier financing from banks as the documentation flow is much closer to real-time,” shared Nitin Jain, the head of treasury and capital markets at Agrocorp International.
This cross-border partnership also opens the doors for dtledgers into the wider Gulf region, including Islamic markets, which form a component of the growing global US$8 trillion open account trade finance market.
“We have huge demand for our network from our 50+ traders signed in from UAE and hence our plan to expand into Middle East and Africa. We have over 400 global traders running 3,600 live trades and over US$1 billion trade financing performed with more than 30 banks globally,” confirmed Samir Neji, the founder and CEO of dtledgers.