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Blockchain platform MineHub has introduced a trade finance network application to allow participants in metals and mining trade to give their financiers visibility over physical transactions.

Launched in 2019, the MineHub platform focuses on trade operations and document flows between metals and mining companies. It allows parties involved in selling, buying, delivering and paying for a cargo of minerals to collaborate securely in real time, sharing electronic information rather than couriering or emailing documents that are subject to interception, fraud and cyber threats.

MineHub Trade Finance, launched today, connects borrowers to their financiers via a secure communication channel, giving them access to the real-time data set of each transaction. In this way, financiers get a direct line of sight to the relevant events, developments, collateral and assets they are financing.

“The borrower invites their lender to the transaction, then they share documents and give the lender access to those parts of the transaction that the lender wants to see as part of the credit requirement,” Arnoud Star Busmann, CEO at MineHub, tells GTR. “That might be for instance the contract with the supplier or the buyer, or it might be the logistics around seeing where the vessel is; it is selective at quite a granular level.”

The origin and provenance of data and documents are recorded in an immutable audit trail secured by blockchain technology. Users can verify the authenticity of key documents like inspection reports, invoices and warehouse receipts, and improve control over key risk events like collateral releases and assignments. In addition, users can verify compliance of transactions with ESG lending criteria.

Commodity trade finance has had a difficult time of late, with numerous fraud scandals forcing some banks to reduce exposures to the sector, or pull out entirely. In attempts to tackle this, various lending codes have been developed. Last year, the Association of Banks in Singapore finalised a series of guidelines on transparency around commodity finance arrangements, with recommendations including that traders give banks sufficient visibility over trade transactions, the underlying goods being traded and any receivables due. This was followed by the publication this month of commodity trade finance best practices by the Swiss Trading & Shipping Association.

By giving financiers visibility into the transactions they are financing, MineHub says it is solving for the transparency issue, such that the incentive and opportunity for fraud is dramatically reduced.

“The idea is that we give lenders a front row seat to the transactions and the underlying assets that they are financing so that they can see in real time what is happening,” says Star Busmann. “To give you an example, a shipper on MineHub sends an invoice to their buyer, and the buyer signs off on that invoice on MineHub. The shipper then sends it to their lender and the lender can immediately see that it is a valid invoice because they can see the details of the transaction and that the buyer has actually signed off on it. So it is very efficient. They don’t have to call around to verify authenticity – it is right there.”

Beyond fraud prevention, Star Busmann says that the application will help provide access into the market for alternative financiers – as well as helping to mitigate some of the impact of the recent flight to quality in commodity finance. “We are making it more accessible for less resourced back offices and mid offices to get exposure to trade finance by automating some of the basic risk controls. We are reducing some of the risks of these transactions for creditors, and this should lead to improved access to capital for SME traders and companies,” he says.

In May this year, MineHub connected its platform to blockchain trade finance network Contour, giving borrowers access to trade finance instruments like letters of credit. The company says that this latest trade finance application is the first of several network applications it intends to unveil in the coming months.