The Asian Development Bank (ADB) has successfully completed its first credit guarantee transaction using distributed ledger technology through its trade and supply chain finance programme, with Standard Chartered and the Bank for Investment and Development of Vietnam (BIDV).
The letter of credit (LC) transaction was conducted over the Contour network, a blockchain-based open industry platform, and involved a US$50,000 shipment of plastics from Thailand’s SCG Plastics Co Ltd to Vietnam’s Opec Plastics Joint Stock Company.
It also marks the first cross-bank LC between Vietnam and Thailand completed using a blockchain platform, reveals a statement by Standard Chartered.
“The coronavirus pandemic underscores the need for the trade finance industry to digitise operations,” says ADB’s head of trade and supply chain finance Steven Beck. “This innovation makes trade more efficient, reduces risk, and lowers barriers to entry for small and medium-sized businesses in developing Asia.”
“We are committed to enabling trade finance through innovation,” says Nicolas Langlois, global head of trade distribution at Standard Chartered. “In this transaction, we co-created and delivered blockchain solutions that will lead the industry’s vision in digitising trade and support the growth of sustainable supply chains.”
The pressure on trade and trade finance to digitalise has accelerated amid the Covid-19 pandemic, as the movement of paper documents slowed. Digital solutions have been primed to update the world of trade, but risks such as fraud and a lack of digital infrastructure in emerging economies remain pressing problems.
The ADB’s combined trade and supply chain finance programme offers guarantees and loans to boost trade in Asia and the Pacific. During the Covid-19 pandemic, the scheme has supported 3,960 transactions worth US$2.8bn in the first half of 2020, up from 2,363 transactions in the same period in 2019. This year’s transactions included 145 related to medical supplies and more than 450 for food and agriculture-related products.