One of China’s ‘big four’ banks, the Agricultural Bank of China (ABC), has used a blockchain platform to issue a farming-based business loan worth around $300,000.
The state-owned ABC backed the loan with agricultural land as collateral, according to the Chinese-language Financial News site.
The transaction was carried out at a branch in Guizhou province and the bank said the initiative was part of its drive to improve access to loans for farmers and businesses, in this case the local tea industry.
The blockchain transaction was assisted by a network of third parties including the provincial branch of the People’s Bank of China (PBoC), which acted as an anchor “node” to keep track of the validity of loan data.
The Agricultural Bank said blockchain was used because it can streamline the loan approval process by keeping all parties updated with information regarding borrowers and collateral. Using this distributed ledger technology also alleviates the possibility of the same piece of land being used as collateral for another loan.
The bank plans to expand the application to encompass loans issued for other types of assets. It has also unveiled a three-year fintech innovation action plan, which includes further blockchain development in addition to artificial intelligence, mobile banking, big data, cloud computing, and information security.
Despite maintaining a strong anti-crypto trading stance, China is embracing blockchain technology in all other areas of industry and commerce. The top three telecoms firms in the PRC recently announced that they are teaming up to use blockchain to bring a high tech step-change to their operations.
In a related financial industry development, nine banking giants, including Citigroup and Barclays, are participating in an app store trial for programs based on blockchain technology. The LedgerConnect app store platform was announced this week by foreign exchange settlement firm CLS Group and tech giant IBM.
The system, says IBM, will make it easier for banks to use blockchain while also encouraging them to use the same standard of protocol for greater interoperability rather than a number of different ones.
Down the line, LedgerConnect or indeed a Chinese domestic equivalent may also be of interest to the Agricultural Bank of China and other Chinese banks, as it would seek to address loan collateral management and facilitate Know Your Customer (KYC) and anti-money laundering (AML) regulations.