SMEs and emerging markets

Blockchain Technology to boost SMEs and Emerging Markets by enabling $1 trillion Trade

Distributed ledger technologies (DLT) or more recognised as Blockchain Technology has given a new direction for an approach to the economic world. A new study by the World Economic Forum and Bain & Company has come up with the results which give a new hope to Small and medium enterprises (SMEs) and Emerging markets.

The study results show that Blockchain Technology could play a major role in reducing the worldwide trade finance gap, enabling trade that otherwise could not take place. The impacts would be largest in the emerging markets and for SMEs which may display the use of the technology beyond well-established markets and corporations.

The Asian Development Bank forecasts the global trade finance gap currently stand s at $1.5 trillion, or 10% of merchandise trade volume and is set to grow to $2.4 trillion by 2025. But the results from the new study shows the gap could be reduced by $1 trillion using the DLT efficiently. The largest opportunities could come from smart contracts, single digital records for customs clearance. They would help mitigate credit risk, lower fees and remove barriers to trade.

If the Blockchain technology is given a right direction and if used efficiently, the main beneficiaries would be SMEs and emerging markets, which suffer most from a lack of access to credit and have abundant room to grow trade. The

Head of Supply Chain and Transport Industry at the World Economic Forum, Wolfgang Lehmacher, “Implementing blockchain-based solutions can eventually do more for SMEs in emerging markets than removing tariffs or closing trade deals.”

The trade finance gap is accounted for Asian economies, including ASEAN, China and Hong Kong SAR, India and Korea as these countries account for almost three-quarters of total documentary for import-export transactions, and account for almost 7% (or $105 billion) of the gap. But for this to work all the countries would need to coordinate equally.

Gerry Mattios, expert Vice-President at Bain & Company, and a key contributor to the study said, “The benefits of adopting DLT in trade will affect everyone from banks to companies to governments to consumers,” he continued “But action has to be taken in a collaborative way and with an ecosystem approach in mind. Individual actions won’t bring the expected results.”

If the DLT is used efficiently and implemented as planned it would be the first time that SMEs and Emerging market would be benefited the most.