International Islamic Trade Finance Corporation (ITFC), a Jeddah based organization, has partnered with the Bangladesh-based City Bank to execute the world’s first Shariah-compliant cross-border blockchain transaction. The Letter of Credit (LC) transaction was financed by ITFC’s Murabaha Trade Finance line.
According to the official press release, the LC was issued on behalf of a Bangladeshi exporter Debonair group to import textile-related accessories from Apparel Link, a trading company based in Hong Kong. Contour, a network build by R3’s Corda blockchain technology, executed the transaction.
Commenting on the recent announcement, Sheikh Mohammad Maroof, Head of Wholesale Banking, Trade Services, SME-Small, and Micro Finance at City Bank, said: “City Bank is the leading digital bank in Bangladesh and is committed to using technology to provide an efficient and satisfying experience to our clients. This transaction will pave the way for improved digital trade through blockchain technology. I would like to thank all related parties who were part of this pioneering transaction.”
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Blockchain Technology and Trade
The use of blockchain technology in cross-border trade has increased recently. In December 2020, HSBC partnered with Contour to digitize international trade. Several financial organizations across the world are collaborating with different blockchain technology providers to test the efficiency of the mentioned technology in international trade.
“We’re finally seeing the trade finance industry embrace digitization and reap the benefits of improved connectivity and efficiency in LC presentation. As we continue building the world’s trusted network for global trade, we’re keen to ensure this growing ecosystem of banks, corporates, and technology providers remain inclusive and accessible for all. This being the first sharia compatible transaction completed on our network marks an important milestone toward our ongoing goal,” Carl Wegner, CEO of Contour mentioned in the official press release.
In November 2020, Finance Magnates reported an announcement by the Australian and Singaporean trade authorities to simplify cross-border trade through the use of blockchain technology between the two countries.