Trade Finance

Trade finance is the financing of domestic and international trade which typically involves multiple players such as importers, exporters, banks, insurers, logistics companies, port authorities etc. Banks participate in this process by providing various forms of support. For example, the importer’s bank may provide a letter of credit to the exporter (or the exporter’s bank) providing for payment upon presentation of certain documents, such as a bill of lading. There are however some problems with the conventional process. Repetitive documents verifications and checking at each stage incurs costs and increases delays. Moreover, the same documents (invoice / bill of lading) could be used multiple times to fraudulently obtain finance because banks may not be able to verify their uniqueness. There is also a lack of visibility of movements of goods to the stakeholders.

Using a distributed ledger technology i.e. R3 Corda, we can overcome these problems. “State” in Corda acts as a single source of truth which gives real time visibility to the participants in a transaction. A full audit trail that shows how facts evolve over time is available. Notaries in Corda ensure that documents such as bill of lading and invoice are not fraudulently used to obtain finance from multiple banks.

Trade Finance Infographic

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