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$1 Trillion Boost in Trade Finance with Blockchain – WEF Research Suggests

September 14

Blockchain could help facilitate trade financing

The outlook on Blockchain technology is really positive. According to a new research, Blockchain has the ability to fill in a $1.5 trillion dollar gap for supply and demand in global trade finance. It can do so by facilitating financing for small and medium-sized enterprises (SMEs) in the new, emerging markets.

The research was conducted by the World Economic Forum and Bain & Company. It suggests that by implementing Blockchain technology, the global businesses could generate an additional $1 trillion dollars in trade finance.

The Asian Development Bank has calculated that the gap in global trade finance is $1.5 trillion. It is estimated to grow to $2.4 trillion by 2025. The research indicates that the main reason why the global trade finance gap is expanding is that SMEs have limited access to credit and loans which would be used to expand their business.

The research says that missing funding could be reduced by $1 trillion if the Blockchain technology was used more widely. They agree that distributed networks are effective at sharing business records with international financial institutions with ease. Also, it brings transparency and credibility to businesses.

The researchers write:

"They would help mitigate credit risk, lower fees and remove barriers to trade. If implemented, the main beneficiaries are set to be SMEs and emerging markets, which suffer most from a lack of access to credit and have ample room to grow trade."

A trade finance system based on Blockchain would be beneficial to the economies of Asia. They account for 7% or $105 billion of the gap in trade finance together with 75% of global document-based transactions on supply chains.

Not only Blockchain can be used to facilitate trade financing, but it’s now legally binding in the courts of China. China’s Supreme Court has announced that Blockchain-derived evidence is now legally binding and can be used in courts.

Sources: Coindesk

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