IBM & Mahindra to Develop Blockchain Supply Chain Finance Solutions in India

Technology giant IBM has announced a partnership with Indian conglomerate and multinational Mahindra to develop blockchain solutions to revolutionize supply chain finance in the country.

The two companies aim to develop a cloud-based solution that is a notable departure from existing traditional banking protocols in India, to enable trade finance transactions from suppliers-to-manufacturers through a permissioned blockchain.

Market observers and researchers of blockchain applications in the financial industry frequently tout trade finance as a sector primed for blockchain disruption. If successful, a blockchain solution for small and mid-sized enterprises in India could have a telling impact in the way the innovation can streamline and fasten business transactions while reducing risks and errors.

Announced today, the IBM-Mahindra blockchain solution will fundamentally enable all parties involved in a supply chain finance solution to act on a singular shared ledger. The supplier and manufacturers will update their individual parts of the transactional process to contribute to a rounded transaction in a process that will ensure increased efficiency and transparency.

IBM elaborates on this with the example of invoice discounting, a common practice in India which is where a finance company issues a loan by taking note of a company’s unpaid settlements from its customers, as collateral. Traditionally, it has proven a cumbersome process where dues can be prolonged and go often unpaid, while errors are commonplace due to different parties maintaining separate and oftentimes inconsistent ledgers. Over a blockchain, however, suppliers will be able to access credit and capital from financiers when transactions and numbers are recorded in a shared ledger in real-time.

The immediate benefactors of the IBM-developed blockchain platform will be Mahindra Finance, the company’s financing arm for everyday Indians.

Anish Shah, Mahindra Group president for strategy said in statements:

This proof of concept represents a significant step forward in blockchain, still a new technology, a more compelling and efficient supply chain solution for Mahindra Finance’s small and mid-sized enterprises loans business.

 

The executive also added that Mahindra is looking at blockchain solutions beyond the financial sector in the auto and agritech industries – the company is a major car and tractor manufacturer with exports around the world.

IBM global business services’ managing partner Lula Mohanty added:

Blockchain is poised to revolutionize business like the Internet did, and IBM is at the forefront of the revolution…The work with Mahindra has the potential to fundamentally transform the way businesses interact with one another and their customers and suppliers, and we’re confident that this engagement can be replicated not just in the finance industry but across other sectors as well.

 

Rampant Blockchain Development to Disrupt Traditional Trade Finance

The announcement comes in a year when a number of blockchain-based endeavors to develop solutions in the trade finance sector have come to the fore, around the world. Singaporean bank DBS and London-based Standard Chartered were working toward a trade finance blockchain platform as early as December 2015, while the Bank of America conducted its own pilot earlier this year. More recently, the bank partnered with Microsoft to press on with a distributed ledger trade finance solution.

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Blockchain tech could have a telling impact on global trade finance.

 

In India, major private sector bank ICICI also announced a successful trade finance pilot transaction over a blockchain between Mumbai and Dubai that saw shredded steel metal scrap imported into India from a UAE-based supplier.

Beyond the pilots and proof-of-concepts, the world’s first global trade finance powered by blockchain technology saw the exports of cheese and butter worth nearly $100,000 from a supplier in Ireland to a food distributor in Seychelles.

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