Trade Finance Overview
According to the International Chamber of Commerce (ICC) 2017 report, world trade flows will grow at an annual rate of about 4.3% and will reach nearly 19USD Trillion by 2020. Majority of this trade is driven by global infrastructure development due to increased population and urbanization. As per Global infrastructure hub 2017 report, by 2040, the global population will grow by almost 2 Billion people a 25% increase. Also, rural to urban migration will skew this growth more towards urban areas leading to an urban population growing by 46 USD. This will trigger massive demand for infrastructure support, especially in an urban area and to keep pace with this growth, the global infrastructure investment needs are forecasted to reach 94 USD Trillion by 2040, which is an average of 3.7 USD Trillion per year. Based on the current spending levels, the shortfall is more than 18 USD Trillion which is around a Trillion dollar gap every year.
To fuel this massive infrastructure growth, financial institutions and banks are supposed to pump money into the ecosystem. However, decreasing trust factor and increasing risk have made it difficult for businesses and individuals to access trade finance or they are denied trade finance due to increased regulatory and compliance limitations of traditional financing system.
Of the global financing needs today, infrastructure remains the most sizeable and critical financing need for both developed as well as developing countries. And, even after being pivotal to any country’s social-economic progress, infrastructure financing still remains underserved. Why? Financing sector suffers from a lot of inefficiencies. Infrastructure financing being the most unglamorous industry receives very less support from the private sector leading to an increasing tax burden on govt. and consequently on the general public. Inefficient, time-consuming and paper-based financing further adds to the cost of capital. Even finance rates vary a lot worldwide and presence of intermediaries makes centralized funds inaccessible to people. Therefore, the present financial ecosystem is incapable of fulfilling the burgeoning financing demand, leading to huge loss of opportunity for global trade and in turn, economic development which requires a disruptive technology like blockchain to innovate financing mechanism to complement traditional banking and finance.
A word about TradeFinex.org
Powered by XDC protocol, TradeFinex platform enables peer-to-peer transactions between financiers, suppliers and beneficiaries. A conceptualized marketplace platform, TradeFinex connects global participants of the trade and finance and enable them for global contracting, financing, payments and settlements.
TradeFinex platform is for individuals, governments, regulators, financial institutions, corporates and others who regularly engage in trade and finance and look for new means of low-cost financing to complement traditional finance. Through this platform, beneficiaries can raise money literally from any part of the world.
XinFin is leveraging the power of TradeFinex, its decentralized enterprise-grade hybrid blockchain enabled trade and finance platform. Offering the benefits of immutability, security, and peer-to-peer settlements features of XDC protocol, XinFin’s TradeFinex platform would help bridge the $15 trillion global infrastructure gap.
How is TradeFinex helping unbanked population get easier access to funds?
TradeFinex recently completed a pilot in a remote area of India. Irinse Foundation along with TradeFinex successfully completed real trial transaction in a remote location of Asia where they got sewing machines, computers and network infrastructures financed by independent financiers in a standard SandBox limit. The platform was trialled in India taking the support of local governing bodies. Similar kind of projects are being financed in various developing countries across the globe.
TradeFinex-An Open API based platform for trade finance
Enterprises, governments, institutions can use TradeFinex, an Open API based platform; as a tool for fulfilling their trade finance needs. Due to the massive response from various ecosystems and fintech partners worldwide, TradeFinex is now evolving into an Open API platform with which many businesses, Fintechs, Rural Bodies, ERP Systems can connect to.
XinFin.org successfully demonstrated financing of a solar plant using blockchain powered TradeFinex platform as a tool. The simulation involved digitizing and representing a solar plant on the blockchain and demonstrated that any projects including those of national infrastructure importance can be financed peer to peer without burdening the treasury. Demand for cross-border finance can be met by greater cooperation between governments and Blockchain capital by the creation of new models of investment and financing.
TradeFinex Infrastructure as an Asset Class (IAC) Sandbox-Consortium Membership
The TradeFinex.org team has also initiated a consortium with open invitations to address peer-to-peer trade finance and asset tokenization of real-world assets by keeping regulatory bodies, beneficiaries, financiers, and fintech companies around Consortium-led governance will make TradeFinex truly decentralized which allows it to sync with the core philosophy of blockchain.
TradeFinex invites Global Public Investors (GPIs), regulators and financial & government institutions to be a part of this consortium. All consortium members will both be a part of the ecosystem and will help in introducing the right instruments, their standardization and closely working with regulators for holistic business development. Members interested in consortium membership can click on https://www.tradefinex.org/publicv/partnership and become part of the global campaign.
Although tradefinex.org is not open for the transaction, it will soon be unveiling its APIs to the public so that interested community members can build use cases and applications on its regulatory compliant XinFin Hybrid Blockchain.
Our vision of TradeFinex as an ideal global trade and finance platform is one with open standards, seamless connectivity amongst various stakeholders of the ecosystem, a frictionless access to secure big data and a free flow of value - efficient management and financing of trade assets and working capital.
Beneficiary- Beneficiary can be an individual, an institution, a community or any government that is looking to raise funds or procure goods and services. They could be designated authorised personnel from the organisation such as the board members or senior management professionals or employees from finance or procurement function.
Financier- Financiers can be an individual retail investor, venture capital or private equity fund, an organization or a financial institution whose business is providing, investing, or lending money. A financier is someone who is actively looking to invest in projects according to his sectorial alignment and risk appetite for an agreed return on investment. On TradeFinex platform, a Financier may finance full or a part of the project along with other financiers.
Supplier- A supplier is an individual or a company that offers services or manufactures / distribute goods to another organization. They could be designated authorised personnel from the organisation such as the board members or senior management professionals or employees from marketing, technical, finance or procurement functions
We at XinFin recognize that this can not be achieved singularly through any silo entity, irrespective of its resources. Hence, we have proposed the creation of a consortium of key stakeholders – global public investors and others - with a shared vision and ambition to participate in the development strategy of this decentralized hybrid blockchain powered global trade and finance platform, TradeFinex. We are convinced that the complementing technological, legal, global finance and trading expertise brought in by our consortium members will accelerate development of this standards-based platform and eventual market adoption.
The consortium will be initiated out of the Global Financial Innovation Network (GFIN) regulatory member - Abu Dhabi Global Markets in the regulated Sandbox RegLab environment. As an official participant of the ADGM Sandbox, XinFin can live-test TradeFinex across the MENA region with the support and regulatory assistance – thus accelerating towards its scalability and robustness.
We invite infrastructure project practitioners and investors involved in essential public infrastructure projects to be consortium members.