This article focuses on the overall use of blockchain technology and the impact it has in solving global trade financing and infrastructural investing problems. Mr. S.V. Sukumar, a senior advisor at XinFin (XDCE), a blockchain-based platform for infrastructure investment and trade finance talked to Ben Robinson, deputy head of research at OMFIF. We detail the major points from the podcast on how XinFin blockchain in its part will solve these persistent problems.
The current state of global trade finance and infrastructure investing is facing a couple of problems in its quest to matching willing buyers and sellers. Some of the most persistent problems arise from the high costs and huge time delays involved in trade finance that hinder investors from deploying their capital and traders from accessing this capital. The global trade finance industry has a capital gap of about $1.6 Trillion USD arising from lack of information, outdated logistics systems and high costs.
Mr. Sukumar focused on the lack of access to trade finance or credit financing by the small and medium sized companies that take up over 80% of the exports in developing economies as per the World Trade Organisation (WTO).
The SMEs technically drive most developing and emerging markets economies. The strain faced by these small businesses to access finance is typically straining the economy. Globally, over half of trade finance requests by SMEs are rejected, against just 7 per cent for multinational companies. Global liquidity tends to be concentrated within the biggest institutions and their clients. This gap is mostly determined by three factors namely;
- Availability of lenders in the market
- The creditworthiness and trustworthiness of the business
- Understanding the nature of the business.
Looking critically at the three issues, the availability of lenders in the market alongside the trustworthiness/creditworthiness of the business are the solvable problems. The third point needs no technological system to solve as it totally depends on the nature of the business.
XinFin Blockchain offers the ideal solution
There is no regulation or legal compliance needed to further the developments of the XinFin Network. However, Mr. Sukumar believes in the government’s role to play in ensuring the widespread adoption of blockchains across the affected industries. The intertwining of blockchains and cryptocurrencies makes some governments fear that the use of the latter in illegal activities or devaluation of their own currencies. The two are however mutually exclusive with cryptocurrencies being one of the hundreds of applications that can be built on blockchains.
“Blockchain holds huge potential to disrupt multiple industries by improvising business processes as a mediator, I will connect the two parallels of blockchain and business. XinFin comprises of a dynamic young team focused on developing a revolutionary technology hence, it’s a great opportunity for me to be a part of this revolution.”–– S.V Sukumar, Senior Advisor at XinFin FinTech
Trade financing will be one of the direct industries that benefit directly from the increased adoption of blockchains in the overall system. The immutable and trustless nature of the technology allows small and medium sized companies to obtain capital funds. XinFin blockchain focuses on the infrastructural investing and global trade finance as their key selling point.
The system offers an immutable, low cost, and trustless system that allows financial institutions, big multiple parties and banks to transfer and settle the payments in a trustless environment. XinFin Fin Tech. built the Tradefinex platform that will connect the beneficiaries, suppliers and financials to offer short term working capital solutions, payment and settlements, reduce cost of financing and offering real-time settlements on the platform.
As blockchains gain adoption across various industries, the credit risk will be minimized if not completely done away with in the global trade financing and infrastructural investing to SMEs in developing economies.
Mr. Sukumar acts in the position of blockchain consultant and advisor to XinFin FinTech Ltd. using his vast experience and networks to unveil the hybrid blockchain to its vast user base and international merchants.