City Bank Executes First Ever Cross-border Shariah Based Blockchain LC Transaction Partnering with ITFC
City Bank has become the first Bangladeshi bank to execute a cross-border Letter of Credit (LC) transaction under a Shariah-based financing arrangement executed using blockchain technology. City Bank has partnered with the International Islamic Trade Finance Corporation (ITFC), the trade solutions arm of the Islamic Development Bank (IsDB) Group, which was both the advising as well as financing bank. The ITFC financed the LC under the Murabaha Trade Finance line with City Bank.
The LC was issued on behalf of Debonair Group, a leading Bangladeshi RMG exporter, for import of accessories for garments industries from a Hong Kong-based exporter, Apparel Link (HK) Ltd.
The transaction was conducted on Contour’s network, which was built using R3’s Corda blockchain technology. Processing time for this transaction was extremely short – LC draft initiation to issuance and advising took only 38 minutes compared to the typical 24 to 72 hours required for regular cross-border LCs.
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. In addition, as all related parties and clients are members of the network, they can see and share all relevant information without the requirement of visiting the banks in person, a bigger challenge with Covid-19 restrictions. The ITFC, in this case, advised Apparel Link (HK) despite them not having any physical presence in Hong Kong. The increased efficiency results in a reduction of costs at all ends.
“City Bank is the leading digital bank in Bangladesh and is committed to using technology to provide efficient and satisfying experience to our clients. This transaction will pave the way for improved digital trade through blockchain technology,” said Sheikh Mohammad Maroof, City Bank’s Additional Managing Director “I would like to thank all related parties who were part of this pioneering transaction.”
CEO of Contour, Carl Wegner said, “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 eco-system of banks, corporates and technology providers remains inclusive and accessible for all. This being the first sharia compatible transaction completed on our network marks an important milestone toward our ongoing goal.”