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ICBC Creates Innovative Supply Chain Financing for Small- and Micro-sized Enterprises by Applying Blockchain Technology

In recent years, in compliance with the transformation and upgrade of supply chain operation modes of small- and micro-sized enterprises, Industrial and Commercial Bank of China (“ICBC”) has been vigorously developing online and offline supply chain financial service system. A few days ago, ICBC, by creating innovative factoring products for multi-level suppliers, issued the first digital credit financing, thus providing online factoring financing for small- and micro-sized enterprises at the lower end of the value chain. In the first nine months of 2018, ICBC has granted more than RMB45 billion for 1,300 upstream and downstream customers, among which nearly 45% are small- and micro-sized customers.

As informed by an ICBC official, for a long period of time, due to the lack of effective control methods for transaction flow and cash flow, banks only offer factoring financing for the first-tier suppliers of core enterprises, which, on the other hand, want banks to offer financing for small- and micro-sized enterprises at the lower end of the industry chain. Because of the structural contradiction of the supply chain financing, the joint force between banks and enterprises to develop supply chain is yet to be formed. To solve such problem, ICBC, together with core enterprises and third-party supply chain financial service platform, will pool purchase cash flow and trade flow of core enterprises and all-tier suppliers into the block collaborative platform by adopting blockchain. Any suppliers on the supply chain with a digital credential of receivables can apply for financing online from ICBC. Once the application reaches ICBC Smart Loan platform, the loan funds can be transferred to the enterprise’s account instantly, which effectively meet the cash demand of these enterprises. According to introduction, digital credit credential, based on the payment confirmation from a buyer (core enterprises) to a seller (first-tier suppliers) and by applying blockchain, is a credit document for payable debt issued by the buyer through ICBC or collaborative institutions recognized by ICBC, and recorded in the form of data text. Credit credential flows reversely to the upstream along the trade flow of the industry chain. Any suppliers on the supply chain with a digital debt credential can apply for factoring from ICBC. By developing digital credit credential financing, ICBC will enhance supply chain financing, thus further upgrading financial service level for small- and micro-sized enterprises.