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Blockchain To Cut Supply-demand Gap In Global Trade Finance By $1 Tln: WEF


Blockchain technology could generate $1 trillion in trade finance in 10 years by dismantling financing barriers for small and medium-sized enterprises or SMEs and emerging markets, World Economic Forum or WEF said.

According to a joint research conducted by WEF and Bain & Co., the new digital technologies, especially distributed ledger technology, can reduce a large part of the estimated $1.5 trillion-dollar supply-demand gap in global trade finance. The blockchain technology could ease financing for SMEs in emerging markets, and facilitate about $1.1 trillion of new trade volumes globally over the next decade by removing barriers, it said.

The Asian Development Bank estimates there was a $1.5 trillion trade financing gap in 2017, representing roughly 10% of global merchandise trade volumes. The gap is estimated to grow to $2.4 trillion by 2025 if left unsolved.

The issue largely arises from limited access to credit and loans for SMEs that are looking to expand their businesses, the research noted. This missing funding could be reduced significantly if blockchain is used more broadly.

The technology could share business records across financial institutions along the supply chain and bring transparency. It also could help mitigate credit risk, lower fees and remove barriers to trade.

The researchers added that a blockchain-based system would be particularly beneficial to Asian economies since almost three-quarters of total documentary import and export trade transactions originate or arrive in Asia.

Bain & Co. estimated that demand for supply chain finance is expanding by 5-15% a year in the Americas and Western Europe, and 10-25% in Asia, with food and retailing among the most active industries. Yet, much of that demand remains unmet or underserved.

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