City Bank has executed the first-ever cross-border Shariah-based blockchain letter of credit (LC) transaction in Bangladesh, in a move that would reduce LC processing time from 24-72 hours to 38 minutes.
The LC was issued on behalf of Debonair Group, a leading Bangladeshi garment exporter, for import of accessories for garments industries from a Hong Kong-based exporter, Apparel Link (HK).
City Bank has partnered with the International Islamic Trade Finance Corporation (ITFC), the trade solutions arm of the Islamic Development Bank (IDB) Group, which was both the advising and thefinancing bank.
ITFC financed the LC under the Murabaha Trade Finance line with City Bank.
The transaction was conducted on Contour’s network, which was built using R3’s Corda blockchain technology.
Blockchain technology allows parties to manage their own data while transacting and viewing shared information seamlessly and securely with their trading partners and service providers.
This results in transparency in transactions, reducing the scope for forgery and fraud significantly.
“Debonair Group is excited to be a part of this digital transformation,” said its MD Mohammed Ayub Khan.
The process has been smooth and extremely fast compared to traditional paper-based transactions, he added.
The processing time for the transaction was extremely short, he said, Sheikh Mohammad Maroof, additional managing director of City Bank.
The LC draft initiation to issuance and advising took only 38 minutes compared with the typical 24 to 72 hours required for regular cross-border LCs.
“This transaction will pave the way for improved digital trade through blockchain technology,” Maroof said.
Amid the pandemic, City has introduced a number of digital products for clients owing to the demand.
In July last year, the bank launched a collateral-free digital loanservice through which clients can request and receive loans of up to Tk 10,000 instantly through bKash.
Last year, City introduced a mobile app for customers to open accounts instantly, which was another digital transformation, Maroof added.