An online marketplace lender and a subsidiary of a major electronics firm have united to launch ‘Chained Finance’, China’s first blockchain platform for supply chain finance. The solution is aimed at providing better financing possibilities for small and medium enterprises (SMEs) in China.
China’s underserved SME market of some 40 million SMEs will benefit from the new blockchain platform, gaining access to much-needed capital that was previously unavailable or hard to come by for the majority of the SME sector.
Named Chained Finance, the launch of blockchain platform was announced by Dianrong, an online marketplace tender and FnConn, a subsidiary of Taiwanese electronics manufacturing giant Foxconn, commonly known as the manufacturer of the iPhone.
Accordingly, the blockchain platform will first target three specific and major industries in electronics, auto manufacturing, and garments. The two companies completed a successful pilot and proof-of-concept which secured funding for Chinese SMEs, with US$6.5 million (RMB45 million) in loans originating for the enterprises.
“Blockchain is revolutionizing the finance industry and offers seamless solutions to any company operating and financing complicated supply chains,” stated Dianrong founder and CEO Soul Htite.
Blockchain in Supply Chain Financing
A blockchain-based supply chain finance solution will essentially enable all parties in a supply chain finance solution to act on a single shared ledger. A supplier and manufacturer, along with every other participant, will solely update their parts of the transaction, enabling efficiency and an unprecedented level of trust and transparency on a ledger record that is immutable.
In this scenario, smaller supply chain suppliers will gain capital while large multinational manufacturers see transparency and enhanced visibility.
The complexity and scale of supply chain finance has posed major challenges in ensuring adequate funding and efficient operations. Chained Finance creates a unique ecosystem that will provide supply chains with easier access to funding at competitive rates. In return, supply chain operators will gain greater visibility oif their suppliers and the many layers of finance embedded in the process.
Shanghai-based Chained Finance currently houses 40 employees and excepts to grow in number as the industry solution takes off in a massively underserved market. The executive adds that the blockchain platform will effectively curb concerns around trust faced by counterparties with smart contracts delivering automated execution.
“[E]very payment, every supply chain transaction, can be more transparent, manageable and easily authenticated” due to the blockchain platform, said FnConn CEO Jack Lee.
The launch comes soon after a similar blockchain platform for supply chain finance was announced in China’s neighbor, India. Technology giant IBM and Indian multinational conglomerate and lender Mahindra announced a partnership in November toward developing blockchain applications for better, more efficient supply chain financing among India’s SMEs.
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