Blockchain and fintech can bridge global trade gap, new research says

The Dubai International Financial Centre is one several regional centers attempting to attract fintech startups. (Reuters)
Updated 15 May 2018
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Blockchain and fintech can bridge global trade gap, new research says

  • Blockchain could significantly reduce paperwork for banks and corporates, which accounts for 20 percent of cost of global trade, according to DMCC
  • Regional financial centers are competing to attract fintech entrepreneurs in a bid to help modernize financial services

LONDON: Technology innovations such as blockchain could help cut the costs related to financing global trade by as much as 20 percent, according to new research compiled by the Dubai Multi-Commodities Center (DMCC).
The free zone’s report — released on May 15 — said that the cost of global trade stands at approximately $1.8 trillion, and 20 percent of that cost is related to paperwork processed by banks and corporates.
Blockchain — which acts as a digital public ledger that records transactions — could cut out the need for much of this paper-based documentation.
The DMCC-commissioned research claims that these kinds of technological advancements could help bridge the $1.5 trillion global trade finance gap, with many small and medium-sized companies still struggling to access finance needed to support their international trade operations.
The report — which gathered views from 250 industry leaders and academics in major commodity trade hubs including Dubai — said that 50 percent of funding applications submitted by small-to-medium sized companies are rejected by banks.
The emergence of new fintech firms setting up their own digital lending platforms could mean that SMEs have more funding options available to them, reducing their reliance on banks.
“Alternative trade finance solutions are becoming accessible to a much larger extent than previously,” the report said.
Dubai, alongside other trade hubs such as Singapore, Hong Kong and London, are exploring the use of new technologies such as blockchain, as well as collaborating more closely with fintech companies, according to the research.
Global venture capital investment in fintech firms rose 18 percent to $27.4 billion in 2017, according to research by consultancy.uk, with digital payments and lending services attracting the most investment capital.
“Just as the shipping container revolutionized trade in the 1950s, sweeping advance in tech will reshape trade and how we move goods across borders,” said Gautam Sashittal, DMCC’s Chief Executive Officer.
“Our research helps us all understand how global trade will evolve, and how we can prepare, over the next decade.”
Dubai announced plans last year to launch emCash — the first state-sponsored cryptocurrency. Using an emPay wallet, emCash would allow UAE residents to make payments with a secure digital currency in real time without the need to go through intermediaries.
The Dubai International Financial Center (DIFC) also works closely with fintech firms, running 12-week FinTech Hive programs to support new companies.
Similar initiatives have been launched by financial centers in Saudi Arabia, Abu Dhabi and Bahrain.


Selling sketches and clothes, Libyan women set up businesses against the odds

Updated 25 June 2019
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Selling sketches and clothes, Libyan women set up businesses against the odds

  • Libya has only a tiny private sector and the economy is dominated by the state
  • Cumulative inflation over the last four years has seen real incomes lose more than half of their purchasing power

TRIPOLI: When inflation began eating into her state-paid salary Libyan architect and assistant professor Seham Saleh started selling drawings over the Internet to help pay the bills.
She joins a growing number of Libyan women launching start-ups in the conservative Arab country, where many still think a woman’s place is in the home but where the strains on personal and family income following years’ of political chaos have forced women to look for more work.
Libya has only a tiny private sector, which means there is a market for locally-produced goods. The economy is dominated by the state, which employs most adults under a structure set up by Muammar Qaddafi, who was toppled in 2011.
Men are the traditional breadwinners, although around 30 percent of women were in the labor force as of 2015, according to a UN report.
“I cannot live on my assistant professor salary of 1,000 dinars ($256) even if it is paid out,” said Saleh. She has been selling drawings of people in Libyan dress or book marks she created on a computer.
“Thank God... people wanted to buy the products,” she said. She also does freelance work as an architect.
Once one of the richest countries in the region, the chaos and civil war that ensued after the fall of Qaddafi has seen Libya’s living standards erode. Little is now produced in Libya other than oil, even milk is imported from Europe.
Cumulative inflation over the last four years has seen real incomes lose more than half of their purchasing power, and the government effectively devalued the dinar last September.
A cash crisis means public servants often do not get their salaries paid out in full. Lenders have no cash deposits as the rich prefer to hold their cash themselves, rather than deposit it in a bank.
Women rarely had jobs outside of sectors such as teaching, although the need for more family income has changed the situation, said Jasmin Khoja, head of a women’s business support venture.
Her organization, the Jusoor center for studies and development, has trained some 33 would-be female entrepreneurs, offers legal advice and office space as women often can’t afford their own.
While Seham’s “Naksha” art business is in its early stages, others such as Najwa Shoukri’s start-up are growing fast. She started designing clothes from home in 2016, and selling them online.
Now, together with five other women, she has a workshop selling 50 pieces a month and plans to open a shop next year on Jaraba Street, the main fashion shopping avenue in Tripoli.
To make the shop a success her output would have to rise to 150 pieces a month. Her brother and family have contributed to investments worth 10,000 dinars.
The biggest challenges for start-ups are legal hurdles and the lack of electronic payment systems.
Some Libyan commercial laws go back to the 1960s and are aimed at big corporations such as oil firms, not start-ups. Under these regulations firms need to deposit thousands of dinars.
“Banks do not give loans, which stops projects and makes them unable to grow or employ other women and young people,” Khoja said.
Undeterred, Mayaz Elahshmi started a business last week training women to fix computers and smartphones.
“There is big demand as many women are reluctant to go to a phone shop where men work, as they have personal files on their phones.”
Six people came to her first training session, each paying 30 dinars.