DBS Bank has launched its first multi-tier financing facility on blockchain platform Rong-E Lian to help Chinese SMEs get faster access to trade finance.

Developed with an unnamed Chinese logistics company, Rong-E Lian offers multi-tier financing solutions to more than 1,000 suppliers in the logistics firm’s supply chain.

The blockchain system allows the credentials of a supplier to be verified within seconds, and once these are verified the bank is then able to offer digital trade financing services to upstream suppliers within 24 hours.

“The blockchain platform is integrated with DBS’ digital onboarding service, which requires facial biometric authentication when a supplier logs onto Rong-E Lian,” says Ginger Cheng, head of large and mid-cap corporates, institutional banking group, DBS.

“In addition, the blockchain platform is also integrated with various China government databases to further validate and verify the authenticity of the transactions made by suppliers in the ecosystem.”

DBS successfully completed its first multi-tier financing transaction on the Rong-E Lian blockchain platform with the logistics company’s suppliers in August. The loan sizes vary depending on the supplier’s size and business needs.

The facility is important to suppliers embedded beyond the first and second tiers of the supply chain, as these are often SMEs which only have access to trade finance at higher rates or sometimes not at all. Using blockchain can mean lenders are able to finance upstream suppliers, as the technology allows transparency through the entire supply chain. This transparency also serves as an added safeguard against potential data manipulation.

Cheng says: “We see continued traction and strong momentum in blockchain applications in trade finance as businesses start to recognise the benefits of the technology. But for blockchain to realise its full potential in trade finance, banks, government agencies and leading industry players will need to help bridge business networks to grow the depth and breadth of ecosystems across industries and borders.”

The multi-tier financing facility comes after Standard Chartered completed its first joint deep-tier supply chain financing transaction with Linklogis – one of China’s largest B2B-focused, independent supply chain platforms – for Digital Guangdong and its suppliers using blockchain technology last month.

Digital Guangdong is a Chinese-based service provider jointly owned by Tencent and state-owned firms China Unicom, China Telecom and China Mobile. So far, it has processed more than 200 million transactions for the residents of Guangdong, a province in South China.

Using Linklogis’ WeQChain, a platform based on Chinese tech company Tencent’s blockchain technology to enable deep-tier supply chain financing, Standard Chartered and Linklogis enabled Digital Guangdong to have transparency of its whole supply chain, as well as cheaper access to credit for its upstream suppliers.