In a first for both an African development finance institution (DFI) and the sugar trade, the largest single-trade transaction to date to have been completed by dltledgers, a global trade finance blockchain platform. This enabled the Trade and Development Bank (TDB) to close a US$22m white cane sugar trade transaction.
The journey started in Asia, where 50,000 metric tonnes of white cane sugar was shipped to a buyer in one of TDB’s Member States, with Agrocorp International - a Singapore-based global agri-commodity trading and processing company - as the seller and trading company, and TDB as the negotiating bank.
With the parties performing their operations digitally in one single private blockchain, this transaction saved a total of four days - a number that TDB says could be pushed to eight in upcoming trades. As a paperless transaction it had a lower carbon footprint, and was more secure than traditional methods thanks to encryption and verification technologies. It also made it possible to reduce all parties’ risks by eliminating potential errors and ambiguities in the exchange and amendment of documents.
In 2018, the world exported over US$19 trillion and imported closer to US$20 trillion - between 80-90% of which relying on some type of trade finance, whether trade credit, insurance or guarantees, such as in the case of this trade, an LC confirmation and discounting transaction.
By some estimations, the global trade finance gap is about US$1.5 trillion, an amount expected to rise to US$2.5 trillion by 2025. With blockchain, the digital disruption brought about in the world of trade finance has the power, not only to bridge this gap, but to boost trade exchanges, notably in Africa, where already, many are leapfrogging over old technologies and directly adopting modern ones – as was the case with the continent’s mobile revolution.
“TDB continues innovating and is keeping step with the fourth industrial revolution by embracing new digital technologies like blockchain," said Admassu Tadesse, TDB president and chief executive. "As we grow, just as it is the case with our clients, we need to continue delivering more for our partners and shareholders by improving the efficiency and speed of our processes while diminishing our carbon footprint, and with this, sustain our vibrant story of impact and attractive returns. With 70% of our portfolio in trade finance, this transaction is lighting up our path into the future.”
“With this transaction, we have the potential to revolutionise how we finance cross-border trade at the Bank," commented Michael Awori, TDB chief operating officer. "Not only will it impact our bottom-line, but it will enable us to reduce processing time, be more responsive to our clients, and de-risk transactions."
“We are now establishing presence in Japan and MENA, and project to carry out $10bn worth of African trade transactions with the Asia Pacific region, including Japan, by June 2020," said Samir Neji, dltledgers CEO. "We are confident that with TDB’s adoption of dltledgers blockchain node for African trade transactions, tens of billions of dollars will be added annually to Africa’s economy, by filling the trade finance gap using our blockchain technology, thereby bringing in transparency and trust across all parties."
"The digitisation of trade flows via blockchain is something that has the potential to really revolutionise the way our industry operates," added Krishna Prasad, general manager, Finance at Agrocorp. "This transaction has proven that sizeable flows can be digitised to avail significant savings in time when generating and sharing trade documents. This time saved can generate meaningful savings with regards to vessel discharge rates and port detention costs. The fact that this initiative was done with a prominent development bank in Africa and in Ethiopia which is an important market for us, makes it all the more special.”
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