Sometimes, small companies need loans to continue working. Blockchain technology could help them store financial information to ask for economic support.
The government of Guangdong, the Chinese province located on the southeast coast of that Asian country, launched a blockchain-based financing platform to help small companies in the region receive loans faster from commercial banks.
One of the largest insures of China, Ping An Insurance, supports the government-led project through a subsidiary whose name is OneConnect. Local media report that Ant Financial, the Alibaba’s Financial Technology (FinTech) arm, also supports the development.
The main objective of the project is to streamline the process for commercial banks to lend funds to small businesses with more detailed and reliable profiles, including credit ratings, provided by its blockchain network.
Last July, the government of Guangdong launched the new blockchain initiative. The idea is to use the blockchain financing platform to connect with nearby Hong Kong and Macao to help small businesses over there to get loans easier.
“Borrowing money from commercial banks for small and companies has been slow and expensive”, explained Xiaojun He, the Director of Guangdong Local Financial Regulatory Bureau, according to a local report. That is the reason why they want to implement blockchain technology.
During November, Ant Financial announced it planned to test its blockchain network, called Ant Blockchain Open Alliance, to support startups. Besides, OneConnect filed a $468 million initial public offering in the United States of America, in the same month.
To achieve its objective, the new platform creates credit ratings for small and medium businesses based on their financial and administrative information through a blockchain network of 26 government agencies such as the State Administration for Industry and Commerce.
Blockchain technology is known as a platform that allows storing information securely. It is used in different fields. In the food industry, for example, it allows tracing the origin of any product and its advance in a supply chain.
Now, with this platform, small businesses will be able to use their intellectual property and export-import trading records to apply for funds from commercial banks, something that is impossible under the status quo.
This would be possible thanks to that particular advantage that blockchain technology offers. Storing all about the export-import trading records would help conclude these processes faster and automatically since, with that information, the company would be able to apply for a fund in a commercial bank.
The platform can also match small companies with 319 financial products, depending on their financial situations. This will reinforce the first benefit in favor of those small businesses that use blockchain technology.
According to the reports of local media, the platform has collected information from more than 11 million companies, as well as 129 financial institutions.
So far, it has processed three transactions between local technology startups and commercial banks, including the Industrial Commerce Bank of the People’s Republic of China. This is the case of China Construction Bank and China Construction Bank and Ping An Bank.
Small companies will benefit from blockchain and internal processes would be faster thanks to new technologies.
By María Rodríguez