October 17, 2018 / 3:56 PM / 8 months ago

Anglo-Gulf Trade Bank aims to bridge trade finance gap with blockchain

ABU DHABI/LONDON (Reuters) - Anglo-Gulf Trade Bank, a British/UAE start-up, is aiming to shake up trade finance in the region by using blockchain to speed up transactions, becoming the latest financial services firm to adopt the technology.

The bank, which opened in the UAE capital Abu Dhabi with initial capital of $100 million, will facilitate trade by companies between the Middle East, Britain and Asia, Chairman Jeremy Parrish told Reuters on Wednesday.

Parrish said the bank aimed to digitalise trade finance to help to address a financing shortfall.

“There is a gap in the market, a gap between demand in trade finance and the supply chain.”

Trade finance is often a problematic area for small businesses and emerging market countries. The Asia Development Bank has estimated there is a global trade finance gap of around $1.5 trillion.

Parrish said the bank plans to launch in early 2019 with final regulatory approval awaited.

Blockchain, originally designed as the technology underpinning the cryptocurrency bitcoin, is a shared record of data kept by a network of individual computers rather than a single party. 

Proponents say it has the potential to transform paperwork-heavy industries from finance to real estate by cutting transaction costs and boosting transparency, thus reducing the risk of fraud. 

Trade finance is seen as an area that could benefit from blockchain technology as it could reduce paperwork and complexity. A number of global banks and trading firms are launching the first blockchain-based platform for financing the trade of oil, wheat and other commodities. The project is due to go live later this year.

In July, Hong Kong’s financial regulator and banks including HSBC Holdings Plc and Standard Chartered PLC said they would launch a blockchain-based trade finance platform.

But analysts say the volume of trades through recent schemes have been so far been low, and that a critical mass in blockchain’s adoption has not yet been reached. Standardising or reconciling differing terms for quality and shipping schedules could also be a problem, the analysts also said.

The Anglo-Gulf Trade Bank is a 51:49 joint venture between the Britain’s AGTB Holdings Ltd and Abu Dhabi’s Mubadala Investment Company.

Reporting By Stanley Carvalho & Tom Wilson, editing by Jane Merriman

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